The Effect of Political Budget Cycle on Local Governments’ Financial Statements in a Young Democracy

Fuad Rakhman & Shahrokh Saudagaran (2023) The effect of political budget cycle on local governments’ financial statements in a young democracy, Public Money & Management, 43:5, 512-520, DOI: 10.1080/09540962.2023.2173369

Posted: 1 Nov 2023

See all articles by Fuad Rakhman

Fuad Rakhman

Universitas Gadjah Mada (UGM) - Faculty of Economics and Business (FEB)

Shahrokh M. Saudagaran

University of Washington, Tacoma - Milgard School of Business

Date Written: August 12, 2023

Abstract

This article examines whether the political budget cycle exists among local governments in Indonesia, which are characterized by limited discretion in revenue generation, high financial dependence, and low levels of debt. Using 4,769 financial statements of local governments from 2008 to 2018, the authors found that budget surplus and cash holdings were lower before election years, confirming the relatively higher government expenditures by incumbents in the years leading up to an election. Political budget cycles were found to be stronger when mayors were eligible for re- election and when local governments were relatively less developed.

Keywords: Budget surplus, cash holding, Indonesia, local government, political budget cycle, young democracy

Suggested Citation

Rakhman, Fuad and Saudagaran, Shahrokh M., The Effect of Political Budget Cycle on Local Governments’ Financial Statements in a Young Democracy (August 12, 2023). Fuad Rakhman & Shahrokh Saudagaran (2023) The effect of political budget cycle on local governments’ financial statements in a young democracy, Public Money & Management, 43:5, 512-520, DOI: 10.1080/09540962.2023.2173369, Available at SSRN: https://ssrn.com/abstract=4539045

Fuad Rakhman (Contact Author)

Universitas Gadjah Mada (UGM) - Faculty of Economics and Business (FEB) ( email )

Bulaksumur
Yogyakarta 55281
Indonesia

Shahrokh M. Saudagaran

University of Washington, Tacoma - Milgard School of Business ( email )

1900 Commerce Street
Campus Box 358420
Tacoma, WA 98402-3100
United States

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