The influence of auditor term length and term limits on US state general obligation bond ratings

Journal of Comparative Economics

Eichenberger

2010

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a b s t r a c tSchelker, Mark, and Eichenberger, Reiner-Auditors and fiscal policy: Empirical evidence on a little big institution Various political institutions designed to control the government have been analyzed in the academic literature. However, an important institution has been neglected so far: independent auditing institutions with an extended mandate to audit the budget draft and individual policy proposals. We argue that such auditors improve transparency and provide essential information on the impact of policy proposals on common pool resources, which leads to less wasteful spending. We empirically analyze the impact of such auditors on fiscal policy at the Swiss local level. Auditors who can evaluate and criticize policy proposals ex ante to policy decisions, significantly reduce the general tax burden and public expenditures. The results are similar for different datasets and robust to various changes in the econometric specification.

Section: Hypothesesmentioning

confidence: 99%

Auditors and fiscal policy: Empirical evidence on a little big institution

Journal of Comparative Economics

Eichenberger

2010

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“…With this extended mandate, audits cover a wider range of government activities. In a study analysing US state auditors, Schelker (2012) finds evidence that performance audits improve government general obligation bond ratings.…”

Section: Public Auditorsmentioning

confidence: 99%

“…State auditing institutions We use two measures to capture a state auditor's mandate and independence as proposed by Schelker (2008Schelker ( , 2012. Auditor independence is captured with an indicator variable taking value one if the chief auditor is elected by the citizens and the value zero if he or she is appointed by either the legislature or the executive.…”

Section: Datamentioning

confidence: 99%

Governance, bureaucratic rents, and well-being differentials across US states

Luechinger

Stutzer

2013

Oxford Economic Papers

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We analyse the influence of institutional restrictions on bureaucratic rents. As a measure for these rents, we propose subjective well-being differentials between workers in the public administration and workers in other industries. Based on data for the US states, we estimate the extent to which institutional efforts to strengthen bureaucratic accountability affect differences in well-being. We find that well-being differences are smaller in states with high transparency, elected auditors, and legal deficit carryover restrictions. These findings are consistent with limited rent extraction under these institutional conditions. No or weak effects are found for performance audits and regulatory review.

“…The design of state auditing institutions is defined in the state constitution or in state laws. I present empirical results on the influence of auditor term length as well as of auditor term limits on credit ratings (see also Schelker ). I examine the discussed linear and potential non‐linear relationship of term length on outcomes.

\begin{matrix} R_{i t} = α + β_{1} t e r m l e n γ t h_{i t} + β_{2} {(t e r m l e n g t h)}^{2}_{i t} + β_{3} t e r m l i m i t_{i t} + {bold-italicA}_{i t} g + \\ {bold-italicX}_{i t} δ + μ_{t} + ϵ_{i t} \end{matrix}

…”

Section: Empirical Evidence From the Public Sectormentioning

confidence: 99%

“…Significance level: * 0.05 < p < 0.1, ** 0.01 < p < 0.05, *** p < 0.01. Source : Own calculations based on Schelker ().…”

Section: Empirical Evidence From the Public Sectormentioning

confidence: 99%

Auditors and Corporate Governance: Evidence from the Public Sector

2013

Kyklos

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Corporate auditors review and evaluate financial statements. To enhance independence the selection process and mandatory auditor rotation requirements have been debated intensively. The available empirical evidence is not conclusive and suffers from serious endogeneity problems. We propose learning from the public sector in which auditors play a similar role and present empirical evidence on the impact of auditor term length and rotation requirements on government performance at the US State level. We find evidence indicating that relatively short as well as extended auditor terms have a negative, and rotation requirements have a positive effect on state credit ratings. (98 words) JEL-Code: G30, G34, M42