Do local governments use municipal companies for off-balance-sheet financing?

	(1)	(2)	(3)	(4)
Variable	short-term debt	short-term debt	long-term debt	long-term debt
Revenue diversification	1.399^** (0.680)	1.356^** (0.683)	2.120^*** (0.394)	2.059^*** (0.397)
Grant_revenue	−0.055 (0.361)	0.012 (0.363)	1.268^*** (0.209)	1.343^*** (0.211)
Unemployment_rate	−1.745 (1.355)	−1.522 (1.359)	0.448 (0.785)	0.680 (0.790)
Income_pc	1.340^*** (0.307)	1.303^*** (0.315)	0.459^** (0.178)	0.435^** (0.183)
Population_density	0.0004^*** (0.0001)	0.0004^*** (0.0001)	0.003^*** (0.0001)	0.0003^*** (0.0001)
Tax_burden	−0.126^** (10.849)	−0.125^** (0.054)	−0.072^** (0.031)	−0.076^** (0.031)
Lever	0.152 (0.321)		0.838^*** (0.186)
Tangibility		0.271 (0.270)		−0.018 (0.157)
Size		0.49 (0.039)		0.045^* (0.023)
ROA		0.003 (1.030)		−1.599^*** (0.599)
Tax_rate		−0.417 (0.254)		−0.170 (0.148)
Growth		−0.178 (0.136)		−0.021 (0.079)
Constant	−8.119^*** (2.944)	−9.209^*** (2.962)	−9.379^*** (1.705)	−10.322^*** (1.721)
F (p-value)	0.0000	0.0000	0.0000	0.0000
N (municipality × firm)	2,019	2,019	2,019	2,019
R²	0.081	0.086	0.144	0.143

Municipal companies by NACE sections

Top-level NACE Sectors (Sections)	Number of firms	Share(%)	Cumulative percentage
“A” Agriculture, forestry, fishing	1	0.06	0.06
“E” Water supply, sewage, waste management	917	50.80	50.86
“L” Rental and management of a real estate	286	15.84	66.70
“H” Passenger, urban and suburban land transport	157	8.70	75.40
“F” Construction	103	5.71	81.11
“R” Activity of sports facilities	96	5.32	86.43
“D” Electricity, gas, steam and air conditioning supply	232	12.85	99.28
“N” Administrative and support activities	13	0.72	100.00
Total	1,805	100.00

Definition of variables describing municipal companies

Variable	Definition	Data source
Lever	Long-term debt to total assets ratio	ORBIS
Tangibility	Tangible assets to total assets ratio	ORBIS
Size	The logarithm of total assets	ORBIS
ROA	EBIT (earnings before interests and tax) to total assets ratio if EBIT is positive, and 0 otherwise	ORBIS
Tax_rate	Income tax to gross profit	ORBIS
Growth	The growth rate of total assets between 2017 and 2018	ORBIS

Definition of variables describing municipalities

Variable	Definition	Data sources
Dependent variables
Short_debt	Short-term debt outstanding/population	Ministry of Finance, Local Data Bank
Long_debt	Long-term debt outstanding/population	Ministry of Finance, Local Data Bank
Independent variables
Revenue_diversification	Hirschman–Herfindahl Index $\frac{1 - \sum_{i = 1}^{n} R_{i}^{2}}{1 - (\frac{1}{n})}$ {{1 - \sum\nolimits_{i = 1}^n {R_i^2} } \over {1 - \left( {{1 \over n}} \right)}} where R – a share of revenues generated from each source in total revenues, n – number of revenue sources (n = 5 incl. real estate tax, share in income (PIT and CIT) tax, other tax, general charges, miscellaneous general revenue)	Ministry of Finance
Grant_revenue	The logarithm of grant revenue scaled by population	Ministry of Finance, Local Data Bank
Unemployment_rate	Unemployment/population in the productive age	Local Data Bank
Income_pc	The logarithm of total revenues scaled by population	Ministry of Finance, Local Data Bank
Population_density	Number of inhabitants per square miles	Local Data Bank
Tax_burden	Local taxes as a share in total revenues	Ministry of Finance

Municipal companies by number of shareholders (municipalities)

Number of shareholders	Number of firms	Number of shareholders (municipalities)	Number of observations (municipality × firm)
1	1,701	1	1,701
2	57	2	114
3	25	3	75
4	9	4	36
5	5	5	25
6	1	6	6
7	2	7	14
8	1	8	8
9	2	9	18
10	1	10	10
12	1	12	12
Total	1,805		2,019

Descriptive statistics of short- and long-term debt of municipalities in Poland

Variable	N^*	Mean	Median	Q1	Q3	SD	Min	Max
Short_debt	2,019	6.32	7.09	6.39	7.76	2.46	0	9.72
Long_debt	2,019	8.79	9.03	8.49	9.55	1.48	0	11.30

Descriptive statistics

Variable	N	Mean	SD	Min	Max
Municipality-level
Revenue_diversification	2,019	0.773	0.120	0.312	1.067
Grant_revenue (ln)	2,019	9.018	0.224	8.301	10.144
Unemployment_rate	2,019	0.089	0.045	0.018	0.265
Income_pc (ln)	2,019	10.243	0.245	9.775	12.032
Population_density	2,019	750.805	829.326	11	3,993
Tax_burden	2,019	0.527	1.018	0.030	12.255
Firm level
Lever	2,019	0.155	0.165	0	1
Tangibility	2,019	0.718	0.252	0	1
Size	2,019	16.766	1.853	8.517	22.845
ROA	2,019	0.023	0.054	0	0.980
Tax_rate	2,019	0.173	0.212	0	1
Growth	2,019	0.105	0.391	−0.883	3

Determinants of local public short-term debt by industries of municipal companies – subsidiaries of municipalities

Variable	Sector E	Sector L	Sector H	Sector F	Sector R	Sector D
Revenue diversification	−0.091 (0.939)	1.689 (2.236)	2.313 (2.875)	−3.118 (3.049)	−4.498 (3.747)	7.071^*** (2.183)
Grant_revenue	−0.726 (0.522)	1.939^* (1.030)	−0.819 (1.010)	−1.197 (1.437)	−1.968 (1.307)	2.303^* (1.328)
Unemployment_rate	−1.899 (1.890)	−6.724^* (3.512)	6.450 (4.117)	−3.027 (5.766)	7.072 (6.518)	−0.149 (4.074)
Income_pc	1.599^*** (0.477)	0.301 (0.889)	3.120^*** (0.827)	2.160^* (1.284)	2.138^** (0.967)	0.024 (1.308)
Population_density	0.0004^*** (0.0001)	0.0003^** (0.0001)	0.0003^* (0.0001)	0.0003 (0.0002)	0.0002 (0.0002)	0.0001 (0.0002)
Tax_burden	−0.035 (0.078)	−0.0217^** (0.107)	−0.302 (0.233)	−0.385 (0.367)	−0.806^*** (0.193)	0.154 (0.170)
Tangibility	0.135 (0.485)	−0.132 (0.479)	1.703^** (0.839)	0.661 (0.749)	−0.750 (0.974)	0.337 (0.963)
Size	0.041 (0.067)	0.079 (0.088)	−0.243^** (0.109)	−0.125 (0.158)	0.381^** (0.174)	0.304^** (0.119)
ROA	−0.091 (1.783)	−6.740 (4.087)	0.654 (3.725)	5.826 (7.646)	−0.972 (1.575)	−1.327 (5.978)
Tax_rate	0.172 (0.386)	−0.953^* (0.563)	0.036 (0.556)	−0.807 (1.062)	2.428 (1.737)	−2.522^*** (0.788)
Growth	0.021 (0.235)	0.038 (0.413)	−0.531^* (0.269)	−0.383 (0.378)	−0.411 (0.326)	0.501 (0.508)
Constant	−4.453 (4.393)	−15.985^** (7.538)	−17.822^** (7.952)	−0.465 (11.324)	0.191 (10.786)	−25.301^*** (8.932)
F (p-value)	0.0000	0.0000	0.0000	0.3115	0.0001	0.0000
N	1,051	311	189	113	99	242
R²	0.059	0.125	0.228	0.114	0.340	0.176

Determinants of local public long-term debt by industries of municipal companies – subsidiaries of municipalities

Variable	Sector E	Sector L	Sector H	Sector F	Sector R	Sector D
Revenue diversification	2.053^*** (0.581)	−0.143 (0.956)	5.135^*** (1.693)	−0.860 (1.399)	−1.101 (3.108)	1.413 (0.964)
Grant_revenue	1.566^*** (0.323)	0.143 (0.440)	1.349^** (0.595)	0.508 (0.659)	2.876^*** (1.084)	0.260 (0.587)
Unemployment_rate	1.412 (1.170)	2.011 (1.502)	−4.027^* (2.424)	−2.060 (2.645)	−7.779 (5.405)	3.986^** (1.799)
Income_pc	−0.060 (0.296)	1.927^*** (0.380)	0.526 (0.487)	1.862^*** (0.589)	−0.345 (0.802)	1.511^*** (0.577)
Population_density	0.0003^*** (0.0001)	0.0001^** (0.0001)	0.0002^*** (0.0001)	0.0001 (0.0001)	0.0006^** (0.0002)	0.0002^* (0.0001)
Tax_burden	−0.104^** (0.048)	−0.023 (0.046)	−0.078 (0.137)	0.045 (0.168)	0.060 (0.160)	0.020 (0.075)
Tangibility	−0.323 (0.300)	0.284 (0.205)	−0.112 (0.494)	−0.084 (0.344)	0.775 (0.808)	0.324 (0.425)
Size	0.112^*** (0.041)	0.008 (0.038)	−0.022 (0.634)	0.028 (0.073)	−0.027 (0.145)	0.036 (0.053)
ROA	−0.784 (1.103)	−0.240 (1.748)	−7.085^*** (2.193)	−2.940 (3.508)	−1.222 (1.306)	2.178 (2.640)
Tax_rate	−0.415^* (0.239)	0.054 (0.241)	0.186 (0.328)	0.078 (0.487)	−0.377 (1.440)	0.310 (0.348)
Growth	0.250^* (0.145)	−0.138 (0.177)	0.026 (0.158)	−0.737^*** (0.173)	−0.309 (0.270)	0.497^** (0.224)
Constant	−8.329^*** (2.719)	−12.520^*** (3.224)	−12.240^** (4.682)	−14.055^*** (5.195)	−12.380 (8.944)	−11.589^*** (3.944)
F (p-value)	0.0000	0.0000	0.0000	0.0000	0.0020	0.0000
N	1,051	311	189	113	99	242
R²	0.091	0.255	0.338	0.358	0.275	0.201

eISSN:: 2543-6821
Language:: English

Publication timeframe:: Volume Open
Journal Subjects:: Business and Economics, Political Economics, Economic Policy, Economic Theory, Systems and Structures, Microeconomics, Macroecomics

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Do local governments use municipal companies for off-balance-sheet financing?

Published Online: Dec 12, 2020

Page range: 242 - 257

DOI: https://doi.org/10.2478/ceej-2020-0014

Keywordsdebt, municipal companies, municipalities, corporate governance, off-balance-sheet financing

© 2020 Weronika Stobieniecka et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Determinants of local public short-term and long-term debt

Municipal companies by NACE sections

Definition of variables describing municipal companies

Definition of variables describing municipalities

Municipal companies by number of shareholders (municipalities)

Descriptive statistics of short- and long-term debt of municipalities in Poland

Descriptive statistics

Determinants of local public short-term debt by industries of municipal companies – subsidiaries of municipalities

Determinants of local public long-term debt by industries of municipal companies – subsidiaries of municipalities

Keywords
debt, municipal companies, municipalities, corporate governance, off-balance-sheet financing