Academic journal article E+M Ekonomie a Management

Why Do Some Municipalities Apply Accrual-Based Rules More Than Others? Evidence from Turkey

Academic journal article E+M Ekonomie a Management

Why Do Some Municipalities Apply Accrual-Based Rules More Than Others? Evidence from Turkey

Article excerpt

Introduction

In recent decades, public sector accounting reforms have been one of the most striking aspects of the adoption of New Public Management (NPM) (Lapsley & Pallot, 2000; Christensen, 2007; Christensen & Parker, 2010; Ball & Craig, 2010; Pollanen & Loiselle-Lappointe, 2012). Accrual accounting, which is closely related to public-sector accounting reforms, has been studied in various contexts from various perspectives (Pallot, 1994; Shand, 1990; English, Guthrie, & Carlin, 2000; Ryan, 1998; Carnegie & Wolnizer, 1995; Barton, 1999; Carnegie & Wolnizer, 1999; Salinas, 2002; Carlin, 2005). However, the literature has presented limited evidence of the adoption of accrual accounting in emerging countries (e.g., the role of accountants in accounting reform in Malaysia, Nor-Aziah & Scapens (2007) and Saleh (2007); the accounting reform model in Thailand, Upping & Oliver (2012); accounting reform in Indonesia, Marwata & Alam (2006); the adoption of accrual accounting in Indonesia, Harun & Robinson (2010); and local government accounting reform in Indonesia, McLeod & Harun (2014)).

Administrative reforms such as the implementation of accrual-based rules are particularly encouraged by the European Union (EU), the International Monetary Fund (IMF) and the World Bank (WB). Developing countries are pressured to adopt administrative reforms that the international organizations considers best practice (Andrews, 2012). Because these organizations can be viewed as external actors, the above-referenced reforms can be characterized as top-down reforms. However, it is important not to overlook local governments--which can be viewed as internal actors--as practitioners of rules, standards and reforms (Sezen, 2011, p. 322). There are several important reasons that the emerging country of Turkey represents an interesting and important case of policy transfer, including (for example) the implementation of accrual accounting at the local government level. First, Turkey does not fit into either Europe or the Middle East (Muftuler Bac, 2005, p.18), although it will soon join the EU. Turkey's long road to EU membership affects all levels of society, including local governments, and most of the EU's directives will be implemented at the local level. To the best of our knowledge, the EU's effect on the implementation of accrual-based rules has not been studied at the level of local government. Second, emerging countries have a rapidly increasing population. Turkey's population was 56.4 million in 1990, 67.8 million in 2000, 73.2 million in 2010 and 77.6 million in 2014. Rapid urbanization, a growing labor force and high youth unemployment are additional social factors that have implications for social policy (Sozen & Shaw, 2002, p. 478). Because of this rapid urbanization, new municipalities are being created to address societal needs. In this context, our research has been stimulated by the implementation and consequences of accounting reforms in newly established municipalities; to the best of our knowledge, this has never been studied before.

The effects of these accounting reforms --including municipal size, municipal wealth, citizen education level, staff education level, debt ratio, external audits, implementation of EU-funded projects and newly created municipalities--have resulted in various levels of compliance with accrual-based rules among Turkey's new municipalities. This leads us to question why some municipalities demonstrate a heightened level of compliance with accrual-based rules. Examining 102 Turkish municipalities, we employ institutional theory and resource-dependence theory to increase our understanding of the factors that affect the level of compliance with accrual-based rules. We performed a multiple regression analysis (Cohen, Cohen, West, & Aiken, 2013) and found that the most influential predictors of the level of compliance are as follows: external audit, implementation of EU-funded projects and being a new municipality. …

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