Does financial health influence the re-election of local governments?

Abstract

Purpose The purpose of this paper is to investigate the possible influence of financial health of local governments (LGs) on the re-election of politicians. Design/methodology/approach The study investigates a sample of 129 Italian LGs with more than 50,000 inhabitants for the period 2008–2014, resulting in 903 observations. A regression model has been implemented, where the dependent variable refers to the probability of re-election, and different dimensions of financial health are the independent variables. Findings Budgetary and service-level solvency influence positively the probability of re-election of the major, while the ability of the government to generate liquidity to pay its short-term debts is not statistically relevant. Moreover, the sustainability dimension of budgetary solvency is more relevant than the flexibility and vulnerability dimensions. Practical implications To be re-elected, local politicians are advised to pay attention to and preserve the social welfare of citizens with the available resources. Originality/value This study adds fresh insight to the literature on financial health, emphasising the relevance of public financial management in the re-election of local politicians.