ACCOUNTING REFORMS: DETERMINANTS OF LOCAL GOVERNMENTS CHOICES

The introduction of accruals accounting in Italian LGs has been mandated in a way that permits, and in fact encourages, a merely formal compliance. LGs must produce accrual-based financial statements, but double-entry bookkeeping is not mandatory, nor may traditional budgetary accounting be abandoned. Why, then, should they bother to introduce an integrated system of budgetary and accruals accounting? In this paper, we empirically investigate the determinants of LGs\u2019 choices of accounting innovation. According to our results, \u201crational\u201d elements such as complexity, types of activities performed, presence of surpluses, and access to capital markets are seemingly unhelpful in explaining why a LG decides to introduce accruals accounting. What counts are \u201cinstitutional\u201d and cultural explanations, such as the perceptions of CFOs and the north-south divide