Does governance shape local financial condition? Evidence from Brazilian municipalities

Abstract

IMPACTUsing a national panel of all 5,570 Brazilian municipalities from 2018 to 2023, this study finds that stronger managerial governance, measured through planning capacity, staffing structure, and transparency, is associated with more favourable fiscal profiles across three dimensions: strongly for indebtedness, and to a lesser degree for current savings and liquidity. Prior research on municipal financial condition has concentrated on mayoral characteristics or structural fiscal variables. The authors show that organizational capacity is a measurable, distinct correlate of local fiscal health. This finding will be of interest to public sector managers, treasury officials, audit bodies, and policy-makers in decentralized systems.