Cash holding puzzle : a cross country municipal finance analysis based on selected ULBs
Publication details: New Delhi Institute of Town Planners 2024Edition: Vol.21(4), Oct-DecDescription: 48-62pSubject(s): Online resources: In: ITPI journalSummary: This research examines the reasons behind the cash reserves held by Urban Local Bodies (ULBs) and determines if they reflect prudent municipal financial management or lead to agency problems. Due to difficulty predicting their exact revenue and expenditure requirements, ULBs frequently maintain cash reserves to deal with unexpected financial shocks. To better understand why ULBs hold cash and whether excess cash leads to agency problems, the study analyses 38 ULBs from India and 104 ULBs from Canada. The statistical findings reveal that the factors contributing to cash holdings vary across ULBs in different countries, with Municipal Corporations’ growth, population size, state revenue receipts, capital expenditure requirements, and debt- per-capita being significant determinants. Additionally, the study investigates the relationship between excess cash and administrative overhead, finding no evidence of agency issues but indicating that excess cash is managed prudently. Overall, the results suggest that ULBs hold cash primarily for precautionary and transactional purposes.| Item type | Current library | Status | Barcode | |
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Articles Abstract Database
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School of Architecture Archieval Section | Not for loan | 2021204 |
This research examines the reasons behind the cash reserves held by Urban Local Bodies (ULBs) and determines
if they reflect prudent municipal financial management or lead to agency problems. Due to difficulty predicting
their exact revenue and expenditure requirements, ULBs frequently maintain cash reserves to deal with
unexpected financial shocks. To better understand why ULBs hold cash and whether excess cash leads to
agency problems, the study analyses 38 ULBs from India and 104 ULBs from Canada. The statistical findings
reveal that the factors contributing to cash holdings vary across ULBs in different countries, with Municipal
Corporations’ growth, population size, state revenue receipts, capital expenditure requirements, and debt-
per-capita being significant determinants. Additionally, the study investigates the relationship between
excess cash and administrative overhead, finding no evidence of agency issues but indicating that excess
cash is managed prudently. Overall, the results suggest that ULBs hold cash primarily for precautionary and
transactional purposes.
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