Accounting practice, fiscal decentralization and corruption

Fredrick Kibon Changwony, Audrey S Paterson

Research output: Contribution to journalArticle

Abstract

In prior studies, accounting and decentralization corruption solutions have so far been analysed in isolation. In this article, we connect these two strands of literature on corruption. Understanding this connection is important because weak financial accounting and reporting systems can inhibit monitoring incentives and thus reduce decentralization benefits in countering corruption. We argue that the effectiveness of decentralization as an anti-corruption barrier is complemented by the quality of the accounting practice in a country. Using multiple sources of data, we find that decentralization has a positive and increasing effect on reducing corruption among countries with a high-quality accounting practice. In contrast, decentralization has a negative and decreasing effect on reducing corruption among countries with weak-quality accounting practices. These findings are robust to alternative measures of accounting, decentralization and corruption and to endogeneity tests. Our findings demonstrate the crucial information role of accounting in enhancing decentralization monitoring mechanisms and in thereby reducing corruption.

Original languageEnglish
Article number100834
JournalBritish Accounting Review
Volume51
Issue number5
Early online date8 May 2019
DOIs
Publication statusPublished - Sep 2019

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Corruption
Accounting practices
Decentralization
Fiscal decentralization
Monitoring
Anti-corruption
Isolation
Incentives
Financial accounting
Financial reporting
Endogeneity

Keywords

  • Accounting practice
  • Fiscal decentralization
  • Corruption
  • Public sector accounting
  • Financial reporting standards
  • IPSASs
  • PUBLIC-SECTOR
  • MANAGEMENT
  • POLITICAL DECENTRALIZATION
  • INFORMATION
  • DEMOCRACY
  • PRESS FREEDOM
  • CHOICE
  • COMPETITION
  • GOVERNMENT
  • INSTITUTIONAL THEORY

Cite this

Accounting practice, fiscal decentralization and corruption. / Changwony, Fredrick Kibon; Paterson, Audrey S.

In: British Accounting Review, Vol. 51, No. 5, 100834, 09.2019.

Research output: Contribution to journalArticle

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