The impact of accrual accounting on the cost efficiency of municipally controlled enterprises: Evidence from the Japanese municipal sewerage system

Ogawa, Akinobu and Kondoh, Haruo (2025): The impact of accrual accounting on the cost efficiency of municipally controlled enterprises: Evidence from the Japanese municipal sewerage system.

Abstract

In recent decades, the global trend has been moving toward the adoption of accrual accounting in the public sector. However, quantitative analysis regarding its fiscal effects is still in its infancy. Thus, this study examines the impact of accrual accounting on municipally controlled enterprises, with specific focus on the Japanese municipal sewage system. For this purpose, it employs a combination of instrumental variables as well as stochastic frontier analysis to quantitatively determine the fiscal effects from the perspective of cost efficiency. Based on the results, the transition from cash- to accrual-based accounting has led to improvements in overall cost efficiency. These findings also provide new quantitative evidence for future discussions on fiscal discipline, which is a key area in the field of public economics.

• Item Type: MPRA Paper
• Language: English
• Keywords: Public accounting, Accrual accounting, Cost efficiency, Stochastic frontier analysis with instrumental variables
• Subjects: H - Public Economics > H7 - State and Local Government ; Intergovernmental Relations > H72 - State and Local Budget and Expenditures; H - Public Economics > H8 - Miscellaneous Issues > H83 - Public Administration ; Public Sector Accounting and Audits

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