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Is the commercial debt default ratio a reliable indicator of the short-term financial sustainability of portuguese local governments?
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Orientador(es)
Resumo(s)
The Directive 2011/7/EU implementation is assessed through the Commercial
Debt Default (CDD) ratio. However, there is not a common measure of that ratio amongst
the Member States. This paper aims to analyse whether the CDD defined by Portugal is a
reliable indicator for measuring the short-term financial sustainability of Portuguese local
governments. The research is based on the IMF's transparency framework and European and
Portuguese legislation on late payments. Statistical analysis was performed using Pearson's
correlation and simple linear regression to assess whether the unpaid commitments of goods
and services explain the short-term debts. Thus, by evaluating the budget and financial
information consistency, the paper approach represents a novelty in this research area. The
findings identify that the CDD of Portuguese local governments is not a reliable indicator of
their short-term debt sustainability. The information is not consistent, and the indicator is
permeable to creative accounting practices that give the illusion of a financial situation that
may not be real.
Descrição
Palavras-chave
accountability, consistency, local governments, financial sustainability, transparency.