Local governance and financial distress in local governments: the mediating role of delivery system

Abstract

Purpose The purpose of this paper is to establish the mediating role of local government delivery system (here after delivery system) in the relationship between local governance (hereafter, governance) and financial distress of local governments in Uganda. Design/methodology/approach This study is correlational and cross-sectional. It uses a questionnaire survey on a sample of 109 local governments (districts) of Uganda. The data are analysed using SPSS, partial least squares structural equation modelling and Jose’s MedGraph. Findings Results indicate that government delivery system mediates the relationship between governance and financial distress. Delivery system in terms of capacity development and community participation causes positive variances in local government’s financial distress. Also, governance in terms of political clientelism significantly contributes to financial distress more than oversight mechanisms and audit quality. The study finds that delivery system causes more variance in financial distress than governance. Originality/value This study applies the new public management and network governance theory and tests the efficacy of delivery system and governance on financial distress in one-go and succeeded in explaining financial distress of local government using Uganda as the setting; the authors join previous scholars that root for multi-theoretical approaches. Also, this study’s design has allowed for the consideration of more than simply the main effects of governance and delivery systems by exploring the mediating role of delivery systems in the link between governance and financial distress. As such, the authors may now have a more accurate and detailed description of the relationships between governance, delivery system and local government financial distress.