PUBLIC GOODS AND PRIVATE GOVERNANCE: THE CASE OF
MEXICO
Penelope Ciancanelli
Antonio
Reyes
Department of Accounting and
Finance
Strathclyde University
Glasgow, G4 0LN
United Kingdom
David Fasenfest
Center for Urban Studies
Wayne State University
656 W. Kirby
Detroit, Michigan 48202
U.S.A.
Abstract
Traditionally, the public
sectors of developing countries have incorporated activities and institutions
deemed essential to economic development, including banking, stock exchanges,
the central bank, etc. Reform of their
public sectors has therefore involved the externalisation of different classes
of services than those commanding attention in the G-5 states.
Through a case study of the
restructuring of the banking sector in
Mexico, we explore two dominant themes in public sector accounting research.
The first is externalisation of public services through delegation and
privatisation. The second theme is the emergence of agency problems arising
with the transfer of goverance of services to the private sector.
The Mexican case highlights
the importance of the order in which the transfer of accountability is
sequenced and the limits to delegation of accountability for banking
services. In Mexico a relevant audit
infrastructure was not put in place prior to
the reforms. This amplified
moral hazard with respect to lending by the newly privatised commercial banks.
Increased information asymmetries exacerbate
agency problems between the state and its delegated monitors. The limits to the ability of the state to
delegate accountability became evident when the government was forced to use
public funds to recapitalise the poorly managed privately owned banks in order
to rescue the financial system.
These outcomes are not unique to Mexico
and occurred in most developing countries.
Private governance of services that remain ‘public goods’ and for which
accountablity is difficult to structure raises important conceptual and
theoretical issues for public sector accounting research.