earticle

영어

This study analyzes the effects of local revenue on financial performance in 16 metropolitan cities and provinces by employing panel dataset produced under accrual-basis accounting. The findings of this study show that an increase of local tax and non-tax revenue leads to an increase of financial performance. When non-tax revenue is divided between current and temporary, current non-tax revenue is not associated with financial performance. However, an increase of temporary non-tax revenue leads to an increase of financial performance. It appears that cities and provinces tend to sell their assets during the period of fiscal distress in order to lessen fiscal austerity. For example, the city of Incheon sold its assets to private sector when it was faced with fiscal distress in 2012. This study is one of few one using accrual-basis accounting dataset. Compared to cash-basis accounting, accrual basis accounting better measures financial performance. And this study proves such trend. Since the adoption of accrual basis accounting is just less than 10 years in the local government, further empirical studies based on accrual-basis accounting is expected to yield more promising results helping understanding local fiscal behavior.