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The Case of Accounting Information for Infrastructural Assets Reporting: Local Government Borrowings and Investment Choices in the Context of Moral Hazard and Local Government Politics
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Author(s): Dimu Ehalaiye (Massey University, New Zealand), Nives Botica Redmayne (Massey University, New Zealand)and Fawzi Laswad (Massey University, New Zealand)
Copyright: 2020
Pages: 26
Source title:
Financial Determinants in Local Re-Election Rates: Emerging Research and Opportunities
Source Author(s)/Editor(s): Ana Maria Cunha (Polytechnic Institute of Cávado and Ave, Portugal), Augusta Ferreira (University of Aveiro, Portugal), Maria José Fernandes (Polytechnic Institute of Cávado and Ave, Portugal)and Patrícia Gomes (Polytechnic Institute of Cávado and Ave, Portugal)
DOI: 10.4018/978-1-5225-7820-8.ch007
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Abstract
In a civil society, citizens require information to assist them in understanding and monitoring how public resources are managed. Accounting information produced by public managers allows such monitoring and helps citizens to participate in the political process when it comes to election or re-election of the politicians. This chapter discusses the case of investments in infrastructural assets and local government borrowing in New Zealand, with an emphasis on the role of accounting information in the context of moral hazard and fiscal accountability of local government politicians and leadership. The evidence in this chapter shows that New Zealand local governments tend to invest significantly more in visible infrastructural assets such as roads, land, and buildings. This confirms the moral hazard theory that local politicians may be prioritizing infrastructure investments that can be seen by their electorate as evidence of their performance in government, presenting a more favourable picture that leads to politicians' election or re-election on local government bodies.
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