Publicação

Is the commercial debt default ratio a reliable indicator of the short-term financial sustainability of portuguese local governments?

Detalhes bibliográficos
Resumo:	The Directive 2011/7/EU implementation is assessed through the Commercial Debt Default (CDD) ratio. However, there is not a common measure of that ratio amongst the Member States. This paper aims to analyse whether the CDD defined by Portugal is a reliable indicator for measuring the short-term financial sustainability of Portuguese local governments. The research is based on the IMF's transparency framework and European and Portuguese legislation on late payments. Statistical analysis was performed using Pearson's correlation and simple linear regression to assess whether the unpaid commitments of goods and services explain the short-term debts. Thus, by evaluating the budget and financial information consistency, the paper approach represents a novelty in this research area. The findings identify that the CDD of Portuguese local governments is not a reliable indicator of their short-term debt sustainability. The information is not consistent, and the indicator is permeable to creative accounting practices that give the illusion of a financial situation that may not be real.
Autores principais:	Gomes dos Santos, Paula
Outros Autores:	Martinho, Carla; Albuquerque, Fábio
Assunto:	accountability, consistency, local governments, financial sustainability, transparency.
Ano:	2021
País:	Portugal
Tipo de documento:	artigo
Tipo de acesso:	acesso aberto
Instituição associada:	Universidade de Lisboa
Idioma:	inglês
Origem:	Repositório da Universidade de Lisboa

Descrição
Resumo:	The Directive 2011/7/EU implementation is assessed through the Commercial Debt Default (CDD) ratio. However, there is not a common measure of that ratio amongst the Member States. This paper aims to analyse whether the CDD defined by Portugal is a reliable indicator for measuring the short-term financial sustainability of Portuguese local governments. The research is based on the IMF's transparency framework and European and Portuguese legislation on late payments. Statistical analysis was performed using Pearson's correlation and simple linear regression to assess whether the unpaid commitments of goods and services explain the short-term debts. Thus, by evaluating the budget and financial information consistency, the paper approach represents a novelty in this research area. The findings identify that the CDD of Portuguese local governments is not a reliable indicator of their short-term debt sustainability. The information is not consistent, and the indicator is permeable to creative accounting practices that give the illusion of a financial situation that may not be real.