ANALYSIS OF THE FINANCIAL MANAGEMENT OF MUNICIPAL ENTERPRISES IN BLAGOEVGRAD WITH Z-SCORE MODEL

 

ANALYSIS OF THE FINANCIAL MANAGEMENT OF MUNICIPAL ENTERPRISES IN BLAGOEVGRAD WITH Z-SCORE MODEL

Desislava Stoilova

Abstract

It is generally accepted that municipal property is a basic prerequisite for financial autonomy and administrative independence of local authorities. In Bulgaria, municipalities received ownership rights from the Constitution (1991) and this regulation was further confirmed by the Law on Local Self-Government and Local Administration (1991). In 1996 municipal property was finally settled with the adoption of the Law on Municipal Property and the Law on State Property. In the late 1990s local governments received significant amounts of assets from the central government. The process was accompanied by abuses of administrative authority, corruption scandals, and financial mismanagement. Two decades latter, Bulgarian municipalities have different types of assets, but the effectiveness of local financial management is still a topical issue. This paper aims to analyse and estimate the financial performance of nine enterprises owned by Blagoevgrad municipality with Z-Score model. The analyzed period covers the years from 2006 to 2020. The results indicate that municipal enterprises can achieve profitability while providing a wide range of services to the local community.

Keywords: municipal enterprises, Z-Score model, financial management, local governments, Bulgaria

JEL Codes: H70, G33

DOI: 10.37708/el.swu.v4i1.1

CITE AS:

Stoilova, D. (2022). Analysis of the financial management of municipal enterprises in Blagoevgrad with Z-score model. Economics & Law, 4(1), 1-14. DOI: 10.37708/el.swu.v4i1.1
Stoilova, Desislava. 2022. “Analysis of the financial management of municipal enterprises in Blagoevgrad with Z-score model.” Economics & Law, 4 (1): 1-14. doi: 10.37708/el.swu.v4i1.1
Stoilova, D., 2022. Analysis of the financial management of municipal enterprises in Blagoevgrad with Z-score model. Economics & Law, 4(1), pp. 1-14. doi: 10.37708/el.swu.v4i1.1
Stoilova, Desislava. “Analysis of the financial management of municipal enterprises in Blagoevgrad with Z-score model.” Economics & Law, vol 4, no.1, 2022, pp. 1-14. doi: 10.37708/el.swu.v4i1.1

ANALYSIS OF THE FINANCIAL MANAGEMENT OF MUNICIPAL ENTERPRISES IN BLAGOEVGRAD WITH Z-SCORE MODEL

Download Now!
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

References

  1. Agh, P., Vavrek, R., Dvorak, M., & Papcunova, V. (2021). Economic Evaluation of the Management of Municipal Firms at the Level of Rural Local Self-Governments (Case Study). Economies 9(3), 130. https://doi.org/10.3390/economies9030130

  2. Altman, E. (1968). Financial Ratios, Discriminant Analysis and the Prediction of Corporate Bankruptcy. Journal of Finance, 23(4), 589-609. https://doi.org/10.1111/j.1540-6261.1968.tb00843.x

  3. Altman, E. (2005). An emerging market credit scoring system for corporate bonds. Emerging Markets Review, 6(4), 311-323. https://doi.org/10.1016/j.ememar.2005.09.007

  4. Altman, E. (2013). Predicting financial distress of companies: revisiting the Z-Score and ZETA® models, chapter 17 in: Bell, A. R., Brooks, Ch., Prokopczuk, M. (eds.), Handbook of Research Methods and Applications in Empirical Finance, Edward Elgar Publishing, p. 428-456. https://doi.org/10.4337/9780857936097

  5. Benito, B., Bastida, F., & García, J. A. (2010). Explaining Differences in Efficiency: An Application to Spanish Municipalities. Applied Economics, 42(4): 515–528. https://doi.org/10.1080/00036840701675560

  6. Blagoevgrad Municipality (2021). Register of commercial companies with municipal participation. Retrieved September 21, 2021, from the Blagoevgrad Municipality website: http://www.blagoevgrad.bg/files/ZDI/Registyr-turgovski-drujestva_01.01.2022.pdf

  7. Center for Economic Development. (2003). Корупционни практики в процеса на управление на общинската собственост [Corrupt practices in the process of municipal property management]. Retrieved from http://ced.bg/uploads/publication/cor_prac.pdf

  8. Center for the Study of Democracy. (2006, September 13). A Painful Shift in Bulgarian Anti-Corruption Policies and Practice, Policy Brief No. 10. Retrieved from https://csd.bg/publications/publication/csd-brief-no-10-a-painful-shift-in-bulgarian-anti-corruption-policies-and-practice/

  9. Center for the Study of Democracy (2012, July 23). Corruption and Anti-Corruption in Bulgaria (2011– 2012), Policy Brief No. 35. Retrieved from https://csd.bg/publications/publication/policy-brief-no-35-corruption-and-anti-corruption-in-bulgaria-2011-2012/

  10. CLES. (2021). Municipal Enterprises. Retrieved November 3, 2021 from https://cles.org.uk/what-is-community-wealth-building/the-principles-of-community-wealth-building/plural-ownership-of-the-economy/municipal-enterprises/

  11. Constitution of the Republic of Bulgaria. (1991). State Official Journal: 56/1991. Retrieved from https://www.lex.bg/laws/ldoc/521957377

  12. Cuadrado-Ballesteros, B., García-Sánchez, I. M., & Prado-Lorenzo, J. M. (2012). Effects of Different Modes of Local Public Services Delivery on Quality of Life in Spain. Journal of Cleaner Production, 37: 68–81. https://doi.org/10.1016/j.jclepro.2012.06.008

  13. Da Cruz, N. F., & Marques, R. C. (2011). Viability of Municipal Companies in the Provision of Urban Infrastructure Services. Local Government Studies, 37(1): 93–110. https://doi.org/10.1080/03003930.2010.548551

  14. Dexia Crediop (2004). Local Public Companies in the 25 Countries of the European Union, Paris: Dexia. Retrieved from https://www.lesepl.fr/pdf/carte_EPL_anglais.pdf

  15. Ferry, L., Andrews, R., Skelcher, C., & Wegorowski, P. (2018). New development: Corporatization of local authorities in England in the wake of austerity 2010–2016. Public Money & Management, 38(6), 477-480. https://doi.org/10.1080/09540962.2018.1486629

  16. Geller, S. (2019, January 15). Municipal enterprises are businesses or services owned by local public authorities that provide services or generate revenue for local communities. Thenextsystem. https://thenextsystem.org/learn/stories/municipal-enterprise

  17. Grossi, G., & Reichard, C. (2008). Municipal corporatization in Germany and Italy. Public Management Review, 10(5), 597-617. https://doi.org/10.1080/14719030802264275

  18. Junkernheinrich, M., & Micosatt, G. (2007). Kommunaler Schuldenreport Nordrhein-Westfalen. Gütersloh: Bertelsmann Stiftung. Retrieved from https://www.bertelsmann-stiftung.de/fileadmin/files/BSt/Publikationen/GrauePublikationen/GP_Kommunaler_Finanz-und_Schuldenreport_Nordrhein-Westfalen_2007.pdf

  19. Kaganova, O., Nayyar-Stone, R. (2000). Municipal Real Property Asset Management: An Overview of World Experience, Trends and Financial Implications. Journal of Real Estate Portfolio Management, 6(4), 307-326. https://doi.org/10.1080/10835547.2000.12089624

  20. Pérez-López, G., Prior, D., & Zafra-Gómez, J. L. (2015). Rethinking New Public Management Delivery Forms and Efficiency: Long-Term Effects in Spanish Local Government. Journal of Public Administration Research and Theory 25(4): 1157–1183. https://doi.org/10.1093/jopart/muu088

  21. Rubin, I. S. (1988). Municipal Enterprises: Exploring Budgetary and Political Implications. Public Administration Review, 48(1), 542–550. https://doi.org/10.2307/975517

  22. Slavova, Z. (2015). Могат ли да се справят с корупцията местните власти [Can local authorities deal with corruption?]. Review of Economic Policy No 761/2015. Retrieved from https://ime.bg/bg/articles/mogat-li-da-se-spravyat-s-korupciyata-mestnite-vlasti/#ixzz7LzAUvp9e

  23. Sorensen, R. J. (2007). Does dispersed public ownership impair efficiency? The case of refuse collection in Norway. Public Administration, 85(4): 1045-1058. https://doi.org/10.1111/j.1467-9299.2007.00681.x   

  24. Stoyanov, A,. & Gerganov, A. (2017). Anti-corruption: Implementation and Evaluation of Anti-corruption Measures and Policies. Center for the Study of Democracy. Retrieved from https://csd.bg/publications/publication/anti-corruption-implementation-and-evaluation-of-anti-corruption-measures-and-policies-macpi/

  25. Transparency International Bulgaria. (2015). Index of the local integrity system – 2015. Retrieved from http://lisi.transparency.bg/years/2015/

  26. Voorn, B., Van Genugten, M. L., & Van Thiel, S. (2017). The efficiency and effectiveness of municipally owned corporations: a systematic review. Local Government Studies, 43(5), 820-841. https://doi.org/10.1080/03003930.2017.1319360