Munich Personal RePEc Archive

The effects of the new fiscal rule and creative accounting: Empirical evidence from Japanese municipalities

Hirota, Haruaki and Yunoue, Hideo (2017): The effects of the new fiscal rule and creative accounting: Empirical evidence from Japanese municipalities.

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Abstract

The purpose of this paper is to analyze creative accounting by stock-flow adjustment in Japanese municipalities after the introduction of a new fiscal rule. We contribute to the literature by analyzing the interdependency of the new fiscal indexes, which comprise three flow indexes and one stock index. Our main contribution is the finding that municipalities tolerated an increase in their stock indexes while they decreased their flow indexes by reducing reserved funds to avoid exceeding the criteria of the new fiscal rule, as the stock index criterion is weaker than that of the three flow indexes.

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