IDEAS home Printed from https://ideas.repec.org/a/ers/journl/vxxivy2021i1p622-645.html
   My bibliography  Save this article

Debt Dynamics Among European Municipalities and Their Organizations: Comparative Analysis with Focus on Hungary

Author

Listed:
  • Laszlo Vasa
  • Szilard Hegedus
  • Csaba Lentner

Abstract

Purpose: This paper analyzed the debt of municipal subsystems of public finances and the organizations they own compared to EU member countries' GDP during the 2013-2018 period. Our study's essence is to characterize the EU member states based upon the two areas of investigation. We also analyzed the relationships between the liabilities of the entities, and, through the use of statistical methods, we compared the respective values and examined the effect on debt from both local government system models and geopolitical location. Design/Methodology/Approach: Three hypotheses were formulated, and we conducted our research with statistical methods (regression, cluster and variance analyses, LGCEshare variables). We utilized a case study on Hungary to explore the development of the two areas over time and examined how debt value was affected by the regulatory environment. Findings: Between the two areas of the local system's economic management, a statistical connection can be identified. The liabilities as a percentage of the GDP of local government-owned businesses are considering it has been established. This is especially true in Germany and Scandinavian countries. However, it must be noted that the results of the statistical analyses and the theoretical division are different from each other. Another unique element of this study is considering the debt dynamics of municipalities and their corporations following the comprehensive fiscal reforms post-2010. Practical Implications: The research results can be used to assess the related financial positions of local governments and their economic organizations, to which the European Union is also paying increasing attention. Originality/Value: We examined the relationship between the liabilities of local governments and their economic organizations, and we showed a relationship between the two areas by using statistical methods. We found that the effect of the local government system model and geopolitical location on the debt stock is fundamentally determinant, but not in every case.

Suggested Citation

  • Laszlo Vasa & Szilard Hegedus & Csaba Lentner, 2021. "Debt Dynamics Among European Municipalities and Their Organizations: Comparative Analysis with Focus on Hungary," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 622-645.
  • Handle: RePEc:ers:journl:v:xxiv:y:2021:i:1:p:622-645
    as

    Download full text from publisher

    File URL: https://ersj.eu/journal/1984/download
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dionisio Buendía-Carrillo & Juan Lara-Rubio & Andrés Navarro-Galera & María Elena Gómez-Miranda, 2020. "The impact of population size on the risk of local government default," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1264-1286, October.
    2. Giuseppe Grossi & Christoph Reichard, 2008. "Municipal corporatization in Germany and Italy," Public Management Review, Taylor & Francis Journals, vol. 10(5), pages 597-617, September.
    3. Ulf Papenfuß & Marieke van Genugten & Johan de Kruijf & Sandra van Thiel, 2018. "Implementation of EU initiatives on gender diversity and executive directors’ pay in municipally-owned enterprises in Germany and The Netherlands," Public Money & Management, Taylor & Francis Journals, vol. 38(2), pages 87-96, February.
    4. Johann Bröthaler & Michael Getzner & Gottfried Haber, 2015. "Sustainability of local government debt: a case study of Austrian municipalities," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(3), pages 521-546, August.
    5. Laurence Ferry & Rhys Andrews & Chris Skelcher & Piotr Wegorowski, 2018. "New development: Corporatization of local authorities in England in the wake of austerity 2010–2016," Public Money & Management, Taylor & Francis Journals, vol. 38(6), pages 477-480, September.
    6. Hegedűs, Szilárd & Lentner, Csaba, 2020. "Comparative Analysis of Budgetary Indicators of European Municipal Subsystems in the Post-Crisis Term between 2009–2018," Public Finance Quarterly, Corvinus University of Budapest, vol. 65(1), pages 112-133.
    7. Chunling Li & Khansa Pervaiz & Muhammad Asif Khan & Faheem Ur Rehman & Judit Oláh, 2019. "On the Asymmetries of Sovereign Credit Rating Announcements and Financial Market Development in the European Region," Sustainability, MDPI, vol. 11(23), pages 1-14, November.
    8. Bart Voorn & Sandra van Thiel & Marieke van Genugten, 2018. "Debate: Corporatization as more than a recent crisis-driven development," Public Money & Management, Taylor & Francis Journals, vol. 38(7), pages 481-482, November.
    9. Sandra Cohen & Sotirios Karatzimas & Vassilios-Christos Naoum, 2017. "The sticky cost phenomenon at the local government level: empirical evidence from Greece," Journal of Applied Accounting Research, Emerald Group Publishing Limited, vol. 18(4), pages 445-463, November.
    10. Lentner, Csaba, 2014. "The Debt Consolidation of Hungarian Local Governments," Public Finance Quarterly, Corvinus University of Budapest, vol. 59(3), pages 310-325.
    11. Jacob Aars & Hans-Erik Ringkjøb, 2011. "Local Democracy Ltd," Public Management Review, Taylor & Francis Journals, vol. 13(6), pages 825-844, September.
    12. Juan Lara-Rubio & Salvador Rayo-Cantón & Andrés Navarro-Galera & Dionisio Buendia-Carrillo, 2017. "Analysing credit risk in large local governments: an empirical study in Spain," Local Government Studies, Taylor & Francis Journals, vol. 43(2), pages 194-217, March.
    13. Khan, Muhammad Atif & Gu, Lulu & Khan, Muhammad Asif & Oláh, Judit, 2020. "Natural resources and financial development: The role of institutional quality," Journal of Multinational Financial Management, Elsevier, vol. 56(C).
    14. Robert A. Greer, 2016. "Local Government Risk Assessment: The Effect of Government Type on Credit Rating Decisions in Texas," Public Budgeting & Finance, Wiley Blackwell, vol. 36(2), pages 70-90, June.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bart Voorn & Marieke van Genugten & Sandra Van Thiel, 2020. "Performance of municipally owned corporations: Determinants and mechanisms," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 91(2), pages 191-212, June.
    2. Rhys Andrews, 2022. "Organizational Publicness and Mortality: Explaining the Dissolution of Local Authority Companies," Public Management Review, Taylor & Francis Journals, vol. 24(3), pages 350-371, March.
    3. Dionisio Buendía-Carrillo & Juan Lara-Rubio & Andrés Navarro-Galera & María Elena Gómez-Miranda, 2020. "The impact of population size on the risk of local government default," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 27(5), pages 1264-1286, October.
    4. Vicente Pina & Patricia Bachiller & Lara Ripoll, 2020. "Testing the Reliability of Financial Sustainability. The Case of Spanish Local Governments," Sustainability, MDPI, vol. 12(17), pages 1-22, August.
    5. Dag Ingvar Jacobsen, 2021. "Motivational Differences? Comparing Private, Public and Hybrid Organizations," Public Organization Review, Springer, vol. 21(3), pages 561-575, September.
    6. Cristina Cersosimo, 2023. "The determinants of board size in Italian State-owned enterprises operating in water industry," DECISION: Official Journal of the Indian Institute of Management Calcutta, Springer;Indian Institute of Management Calcutta, vol. 50(2), pages 169-182, June.
    7. Laura Deruytter & David Bassens, 2021. "The Extended Local State under Financialized Capitalism: Institutional Bricolage and the Use of Intermunicipal Companies to Manage Financial Pressure," International Journal of Urban and Regional Research, Wiley Blackwell, vol. 45(2), pages 232-248, March.
    8. Shohei Nagasawa, 2018. "Asymmetric cost behavior in local public enterprises: exploring the public interest and striving for efficiency," Journal of Management Control: Zeitschrift für Planung und Unternehmenssteuerung, Springer, vol. 29(3), pages 225-273, December.
    9. Tomasz Jedynak & Krzysztof Wąsowicz, 2021. "The Relationship between Efficiency and Quality of Municipally Owned Corporations: Evidence from Local Public Transport and Waste Management in Poland," Sustainability, MDPI, vol. 13(17), pages 1-30, August.
    10. Imeda Tsindeliani & Sebastian Kot & Evgeniya Vasilyeva & Levon Narinyan, 2019. "Tax System of the Russian Federation: Current State and Steps towards Financial Sustainability," Sustainability, MDPI, vol. 11(24), pages 1-18, December.
    11. Hans Pitlik & Michael Klien & Stefan Schiman, 2017. "Stabilitätskonforme Berücksichtigung nachhaltiger öffentlicher Investitionen," WIFO Studies, WIFO, number 60595.
    12. Stephen Taiwo Onifade & Bright Akwasi Gyamfi & Ilham Haouas & Simplice A. Asongu, 2024. "Extending the frontiers of financial development for sustainability of the MENA states: The roles of resource abundance and institutional quality," Sustainable Development, John Wiley & Sons, Ltd., vol. 32(3), pages 1971-1986, June.
    13. Ding, Yuanyi, 2023. "Does natural resources cause sustainable financial development or resources curse? Evidence from group of seven economies," Resources Policy, Elsevier, vol. 81(C).
    14. Peeter Peda & Giuseppe Grossi & Margo Liik, 2013. "Do ownership and size affect the performance of water utilities? Evidence from Estonian municipalities," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 17(2), pages 237-259, May.
    15. Yang, Jinxuan & Rizvi, Syed Kumail Abbas & Tan, Zhixiong & Umar, Muhammad & Koondhar, Mansoor Ahmed, 2021. "The competing role of natural gas and oil as fossil fuel and the non-linear dynamics of resource curse in Russia," Resources Policy, Elsevier, vol. 72(C).
    16. Oryani, Bahareh & Moridian, Ali & Sarkar, Biswajit & Rezania, Shahabaldin & Kamyab, Hesam & Khan, Muhammad Kamran, 2022. "Assessing the financial rеsоurсе curse hypothesis in Iran: Thе nоvеl dynаmiс АRDL approach," Resources Policy, Elsevier, vol. 78(C).
    17. Ligorio, Lorenzo & Caputo, Fabio & Venturelli, Andrea, 2022. "Sustainability disclosure and reporting by municipally owned water utilities," Utilities Policy, Elsevier, vol. 77(C).
    18. Mohammed, Jabir Ibrahim & Fiador, Vera Ogeh & Karimu, Amin & Abor, Joshua Yindenaba, 2022. "Ownership structure of oil revenues: Political institutions and financial markets in oil-producing countries," Journal of Multinational Financial Management, Elsevier, vol. 66(C).
    19. Serena Santis, 2020. "The Demographic and Economic Determinants of Financial Sustainability: An Analysis of Italian Local Governments," Sustainability, MDPI, vol. 12(18), pages 1-16, September.
    20. Ladislav Mura & Zuzana Hajduová, 2021. "Measuring efficiency by using selected determinants in regional SMEs," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(3), pages 487-503, March.

    More about this item

    Keywords

    Debt; territorial local government subsystem; public service organizations.;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H7 - Public Economics - - State and Local Government; Intergovernmental Relations
    • O2 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy
    • O52 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Europe

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ers:journl:v:xxiv:y:2021:i:1:p:622-645. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marios Agiomavritis (email available below). General contact details of provider: https://ersj.eu/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.