The effects of the new fiscal rule and creative accounting: Empirical evidence from Japanese municipalities

Haruaki Hirota and Hideo Yunoue

MPRA Paper from University Library of Munich, Germany

Abstract: The purpose of this paper is to analyze stock-flow adjustments of creative accounting in Japanese municipalities after the introduction of a new fiscal rule using a difference-in-differences method. We contribute to the literature of creative accounting by analyzing the interdependency of the new fiscal indexes, which include three flow indexes and one stock index, and by identifying the impacts of the new fiscal rule. In addition, we focus on both the ``targeted indexes'' and the ``untargeted indexes'' of the new fiscal rule because some of the municipalities might take advantage of loopholes in the new fiscal rule to improve their ``targeted indexes''. Our main contribution is the finding that the municipalities increase their money transfers to the public enterprise accounts, which is one of the ``untargeted indexes'', after the introduction of the new fiscal rule to avoid the applicable punishments. This phenomenon is creative accounting because the municipalities postpone improving their true fiscal deficits.

Keywords: fiscal rule; creative accounting; stock-flow adjustments (search for similar items in EconPapers)
JEL-codes: H72 H74 H77 (search for similar items in EconPapers)
Date: 2017-06-20, Revised 2020-02-28
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/98861/12/MPRA_paper_89160.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/98861/21/MPRA_paper_98861.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/105694/12/MPRA_paper_89160.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/105694/21/MPRA_paper_98861.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/105694/288/MPRA_paper_105694.pdf revised version (application/pdf)

Related works:
Working Paper: The effects of the new fiscal rule and creative accounting: Empirical evidence from Japanese municipalities (2017)
Working Paper: The effects of the new fiscal rule and creative accounting: Empirical evidence from Japanese municipalities (2017)
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