The Impact of Budget Financing on the Municipal-Owned Enterprises Performance: Case of Kyiv City

Abstract

In recent years, many European studies have focused on municipal companies’ problems, particularly their efficiency in terms of public importance and quality of services provided and return on capital. These issues are directly related to the current series of topical issues of the expediency of public property and issues of reasonable choice between public property and privatization. In our opinion, one of the criteria for the expediency of a business entity being in public ownership is the efficiency of its activities, in particular financial efficiency. This paper aims to clarify the local authority approach to determining the efficiency of municipal-owned enterprises in the capital of Ukraine.In the research, the dynamic and distribution of budget funds between the municipal-owned enterprises of Kyiv were studied, and the dynamics of their return on assets were analyzed. In the course of the research financial statements data of the 128 municipal enterprises were collected and analyzed. It is established that the largest recipients of budget funds are municipal construction companies, while municipal public transport companies receive insufficient funding to cover their needs. The four-year distribution of return on assets was also studied, and its miserable level was stated. With the hypothesis testing regarding the impact of budget financing on the municipal-owned enterprises' efficiency, it is established that the availability and level of budget financing of investments and the presence of budget funds in the revenues of municipal-owned enterprises do not have a significant impact on their profitability.