National Audit, Media Attention, and Efficiency of Local Fiscal Expenditure: A Spatial Econometric Analysis Based on Provincial Panel Data in China

Abstract

Improving the efficiency of local fiscal expenditure is an important way to swiftly mitigate local fiscal risks according to the current economic situation. Based on the provincial panel data of 30 provinces in mainland China (except Tibet Autonomous Region) from 2007 to 2018, a Tobit spatial error model was constructed to test the impact of national auditing on local fiscal expenditure efficiency and to investigate the intermediary role of media attention. Findings show that the disclosing, resisting, and preventing functions of the national audit significantly improve local fiscal expenditure efficiency. Media attention does play an intermediary role, indicating that the information transmission function of the national audit has governance effects. Coupling of the national audit and media attention also positively affects local fiscal expenditure efficiency. This research expands the mechanism of national audits, as they affect the efficiency of local fiscal expenditure; it also provides new empirical evidence for improving such efficiency while mitigating fiscal risks at the local level.

Good Governance within Public Participation and National Audit for Reducing Corruption

“…This means that the prevention, exposure and defensive functions of national audits allow declining corruption. It should be noted that our empirical results are coherent with past studies [54][55][56][59][60][61]. The "immune system" of the national audit includes preventive, exposed, and defensive functions, which have inhibitory effects on corruption.…”

“…These three functions are interconnected and interdependent. Thus, effective exposure to past misconduct can deter future misconduct and strengthen resistance to future attempts at wrongdoing [61,62]. Similarly, effective resistance to misconduct can reduce the need for exposure and prevention measures [7,[54][55][56].…”

“…Considering the prior studies [59][60][61], the prevention function can deter individuals from engaging in corrupt activities in the first place. The knowledge that they could be caught and punished can serve as a strong deterrent, making it less likely that they will engage in misconduct.…”

“…Effective prevention measures, therefore, can reduce the incidence of corruption. Scholars [7,[54][55][56][57][58][59][60][61] have shown that the exposure function, by identifying and exposing cases of corruption, can create a culture of accountability and transparency. It can increase public awareness of the risks and costs associated with corruption and generate pressure on public officials to act ethically [61].…”

“…Scholars [7,[54][55][56][57][58][59][60][61] have shown that the exposure function, by identifying and exposing cases of corruption, can create a culture of accountability and transparency. It can increase public awareness of the risks and costs associated with corruption and generate pressure on public officials to act ethically [61]. Exposing cases of corruption can also deter others from engaging in similar activities, serving as a warning about the consequences of being caught.…”