Do local governments use municipal companies for off-balance-sheet financing?

Abstracts

EN

This paper investigates whether municipalities in Poland use their municipal companies to increase debt capacity beyond the limitations imposed by the fiscal debt rules. The article presents corporate governance and agency problems on the example of relations between local government units and affiliated companies. We review and link literature on corporate finance, in particular capital structure, and public finance - debt liabilities of municipalities. We analyse a sample of 2,019 observations of municipalities and their municipal companies using the Ordinary Least Squares (OLS) method, where explanatory variables were taken from the public and corporate finance (leverage and its determinants). Results show that long-term debt of municipalities is positively associated with the leverage and size of municipal companies, but it is negatively related to their profitability.

Keywords

EN

debt; municipal companies; municipalities; corporate governance; off-balance-sheet financing

• Publisher: Uniwersytet Warszawski. Wydawnictwo Naukowe Wydziału Zarządzania
• Journal: Central European Economic Journal
• Year: 2020
• Volume: 7
• Issue: 54

Dates

published

2020-12-12

Contributors

other

Weronika Stobieniecka

• Alumni of Faculty of Economic Sciences University of Warsaw

other

Anna Białek-Jaworska

• Faculty of Economic Sciences University of Warsaw

Identifiers

DOI

10.2478/ceej-2020-0014