Public Financial Management Systems and Countries' Governance: A Cross‐Country Study
| Author | Yulia Kasperskaya,Caridad Martí |
| Published date | 01 August 2015 |
| DOI | http://doi.org/10.1002/pad.1711 |
| Date | 01 August 2015 |
PUBLIC FINANCIAL MANAGEMENT SYSTEMS AND COUNTRIES’
GOVERNANCE: A CROSS-COUNTRY STUDY
CARIDAD MARTÍ
1
*AND YULIA KASPERSKAYA
2
1
Universidad de Zaragoza, Spain
2
Universitat de Barcelona, Spain
SUMMARY
The objective of this study is to explore whether a relationship exists between public financial management (PFM) systems and
expert perceptions of countries’governance in an international cross-country study. We examine the extent to which variations
in accounting, budgeting and auditing practices are associated with governance in a sample of 97 countries that represent dif-
ferent levels of development, analysing the differences between countries classified into factor, efficiency and innovation-
driven economies. Our concept of governance perception includes three dimensions: accountability, government effectiveness
and corruption. We find that countries with a higher level of economic development show, on average, more sophisticated PFM
systems characterized by the presentation of accrual-based financial statements, the application of value for money audits and
higher budget transparency. When analysing the sub-samples of countries according to the level of economic development,
we find that countries with similar governance perception scores show different patterns of PFM practices, suggesting that there
is no one-size-fits-all approach. Copyright © 2015 John Wiley & Sons, Ltd.
key words—governance; accrual accounting; accrual budgeting; audit; budget transparency
INTRODUCTION
Public financial management (PFM) practices have been one of the central issues in the agenda of public manage-
ment reforms in many countries. The greater demand for transparency, accountability and efficiency forces govern-
ments all over the world to adopt new accounting, auditing and budgeting techniques and to improve the scrutiny
and timeliness of their reporting. The link between the modernization of PFM and the quality of governance has not
been thoroughly explored yet in an international cross-country setting. For instance, a gap needs to be filled as
regards matters of governance and accounting (Broadbent and Guthrie, 2008). In a similar vein, the relationship
between particular governance perception measures, such as corruption and accounting, has received little aca-
demic attention (Alawattage et al., 2007).
This study is aimed at contributing to the incipient body of research about the relationship between expert per-
ceptions of governance and several characteristics of PFM. Selecting PFM characteristics, following Pollitt and
Bouckaert (2011), we consider three areas: accounting, budgeting and auditing. We focus on the degree of adoption
of accrual-based financial statements and budgeting, the timeliness of the release of the audited financial state-
ments, the scope of value for money (VFM) audit and the transparency of budgeting processes as relevant PFM
characteristics, which may influence governance perceptions.
The measurement of the quality of governance has attracted numerous research efforts. A multitude of gover-
nance indicators have been developed, reflecting the fact that there is no consensus on the criteria for measuring
good governance and there is little agreement on what constitutes high-quality government (Nanda, 2006;
Andrews, 2010; Fukuyama, 2013). Given these difficulties in conceptualization, we focus on three main
*Correspondence to: C. Martí, Department of Accounting and Finance, School of Economics and Business Administration, Universidad de
Zaragoza, Gran Vía, 2, 50005 Zaragoza, Spain. E-mail: camarti@unizar.es
public administration and development
Public Admin. Dev. 35, 165–178 (2015)
Published online 15 May 2015 in Wiley Online Library
(wileyonlinelibrary.com) DOI: 10.1002/pad.1711
Copyright © 2015 John Wiley & Sons, Ltd.
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