The association between accounting performance and constituent response in political markets

  • Michael Bradbury, Tom Scott
  • Pacific Accounting Review, November 2015, Emerald
  • DOI: 10.1108/par-02-2014-0007

Do local government constituents respond, at election time, to poor accounting performance?

What is it about?

Individual voters have few incentives to collect information to exercise voting rights. Accounting (and other information) reaches constituents through intermediaries (e.g. the press). Where there is more political competition information intermediaries will be more active. We find that accounting performance is associated with voter turnout and councilor re-election, but not the number of candidates per councilor position. We also find the level of debt, the level of expenditure and whether the councils received a qualified audit report impact the decision to stand for council.

Why is it important?

The big picture is whether accounting information is useful for holding elected officials accountable? We show that it is the budgeting process (the difference between budgeted and actual operating expenditure) rather than extreme performance that is important in elections.

Perspectives

Professor Michael Eric Bradbury
Massey University

There are many accounting studies that look at the association between accounting performance (typically aggregated figure such as earnings and book value) and stock performance measures (prices, trade volume). This study simply looks at the association between accounting performance (the difference between planned and actual costs) and political or electoral measures (candidates per position, voter turnout, and re-election).

Read Publication

http://dx.doi.org/10.1108/par-02-2014-0007

The following have contributed to this page: Professor Michael Eric Bradbury and Assoc. Professor Tom Scott