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The Financial Distress of Public Sector Entities, Causes and Risk Factors. Empirical Evidence from Europe in the Post-crisis Period

Abstract

The work presents a study using General Discriminant Analysis (GDA) to distinguish between a fiscally distressed group and a non-fiscally distressed group in two dimensions: the general government sector and the sub-national government sector. The research was based on 26 European Union (EU) countries in the period 2009–2014, and 10 units of local government sectors were also taken into consideration. The probability of correctly classifying a particular case to its appropriate group of either fiscally distressed or non-fiscally distressed was recognized; therefore, variables that proved to be essential in the discrimination between these groups were also defined. The study assumed that there is a close relationship between financial distress and a state’s tier of government (sub-national/central), its revenue and expenditure, intergovernmental transfers, and debt usage. There is some evidence that the risk of financial distress is positively correlated with revenue concentration and size, and that it depends on the level of government intervention.

Keywords

  • Financial distress
  • Risk
  • Crisis
  • General government
  • Local government
  • Public finance

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Ziolo, M., Porada-Rochon, M., Szaruga, E. (2017). The Financial Distress of Public Sector Entities, Causes and Risk Factors. Empirical Evidence from Europe in the Post-crisis Period. In: Raczkowski, K. (eds) Risk Management in Public Administration. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-319-30877-7_11

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  • DOI: https://doi.org/10.1007/978-3-319-30877-7_11

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