Leadership capacity and financial reporting quality in local government authorities: evidence from Tanzania

Abstract

This study examines the connection between dimensions of leadership capacity and financial reporting quality in Tanzanian local government authorities. Primary data were collected from 126 local government authorities, involving 225 final accounts-accountants and internal auditors, using a survey instrument. The hypotheses were tested using partial least squares structural equation modelling. Results indicate that financial reporting quality in local government authorities is positively and significantly explained by accountability, rule-following, network governance, and political loyalty leadership. This study provides implications for restructuring policies and regulations related to the composition of the full council and its committees, by introducing professionalism, in order to separate political and financial reporting practices in local government authorities. Consequently, the quality of public sector financial reporting will be improved, and conducive environments for the delivery of social services among local government authorities will be assured due to the embrace of accountability, rule-following, and network governance leadership among local government authorities.

Download

PDF

Keywords

Accountability
,
Rule-following
,
Network governance
,
Political loyalty
,
Financial reporting quality

References

  1. Ab Hamid, M. R., Sami, W., & Mohmad Sidek, M. H. (2017). Discriminant Validity Assessment: Use of Fornell & Larcker criterion versus HTMT Criterion. Journal of Physics: Conference Series, 890(1), 1–7
  2. Adiputra, I. M. P., Utama, S., & Rossieta, H. (2018). Transparency of local government in Indonesia. Asian Journal of Accounting Research, 3(1), 123-138.
  3. Andersen, J. A. (2018). Servant leadership and transformational leadership: From comparisons to farewells. Leadership & Organization Development Journal, 39(6), 762-774.
  4. Andiola, L. M., Brazel, J. F., Downey, D. H., & Schaefer, T. J. (2024). Coaching Today’s auditors: What causes reviewers to adopt a more developmental approach? Accounting, Organisations and Society, 112, 101548.
  5. Awuah, B., Yazdifar, H., & Elbardan, H. (2024). Corporate reporting on the Sustainable Development Goals: A structured literature review and research agenda. Journal of Accounting & Organizational Change, 20(4), 617-646.
  6. Baniata, H. M. A. (2024). The Effect of Qualitative Characteristics of Useful Financial Information on Investment Decisions. In Artificial Intelligence and Economic Sustainability in the Era of Industrial Revolution 5.0 (pp. 531-547). Cham: Springer Nature Switzerland.
  7. Bao, H. X., Wang, Z., & Wu, R. L. (2024). Understanding local government debt financing of infrastructure projects in China: Evidence based on accounting data from local government financing vehicles. Land Use Policy, 136, 106964.
  8. Bass, B.M. (1985). Leadership and Performance beyond Expectations. Free Press, New York.
  9. Bisogno, M., Cuadrado-Ballesteros, B., Manes-Rossi, F., & Peña-Miguel, N. (2024). Financial sustainability and sustainable development in local governments: empirical insights. Public Performance & Management Review, 47(3), 784-811.
  10. Bowyer, P., & Fowler, S. (2024). Transformational leadership theory and the Model of Human Occupation. In an Occupational Perspective on Leadership (pp. 27-41). Routledge.
  11. Burns, J. M. (2004). Transforming leadership: A new pursuit of happiness. Grove Press.
  12. Cheong, J. O., & Kim, C. (2018). Determinants of performance in government: Focusing on the effect of organisational politics and conflicts in organisations. International Journal of Public Administration, 41(7), 535-547.
  13. Cohen, J. (1988). Statistical power analysis for the behavioral sciences, 2nd ed. Lawrence Erlbaum Associates.
  14. Creswell, W.J. (2019). Research Design: Qualitative, Quantitative, and Mixed Methods Approaches, 4th ed. Sage publications.
  15. Dewi, N., Azam, S., & Yusoff, S. O. U. T. H. (2019). Factors influencing the information quality of local government financial statement and financial accountability. Management Science Letters, 9(9), 1373-1384.
  16. DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147-160.
  17. Drolet, M. J., Rose-Derouin, E., Leblanc, J. C., Ruest, M., & Williams-Jones, B. (2023). Ethical issues in research: Perceptions of researchers, research ethics board members and research ethics experts. Journal of Academic Ethics, 21(2), 269-292.
  18. EL-Ammari, A. (2023). Does political connection affect corporate financial performance? The moderating role of directors’ financial expertise. Journal of Financial Reporting and Accounting, 21(5), 1073-1099.
  19. Fitrios, R. (2016). Factors that influence accounting information system implementation and accounting information quality. International Journal of Scientific & Technology Research, 5(4), 192-198.
  20. Fornell, C., & Cha, J. (1994). Partial least square. In R.P. Bagozzi (Ed.), Advanced Methods of Marketing Research (pp. 52–78). Blackwell, Cambridge.
  21. Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39-50.
  22. Furqan, A. C., Wardhani, R., Martani, D., & Setyaningrum, D. (2020). The effect of audit findings and audit recommendation follow-up on the financial report and public service quality in Indonesia. International Journal of Public Sector Management, 33(5), 535-559.
  23. Gailmard, S. and J.W. Patty. (2012). Learning While Governing: Expertise and Accountability in the Executive Branch. Chicago, IL: University of Chicago Press.
  24. Galeazzo, A., Miandar, T., & Carraro, M. (2024). SDGs in corporate responsibility reporting: a longitudinal investigation of institutional determinants and financial performance. Journal of Management and Governance, 28(1), 113-136.
  25. Gamayuni, R. R. (2018). The effect of internal auditor competence and objectivity, and management support on effectiveness of internal audit function and financial reporting quality implications at local government. International Journal of Economic Policy in Emerging Economies, 11(3), 248-261.
  26. Habib, A., Ranasinghe, D., Muhammadi, A. H., & Islam, A. (2018). Political connections, financial reporting and auditing: Survey of the empirical literature. Journal of International Accounting, Auditing and Taxation, 31, 37-51.
  27. Haider, S., Fatima, N., & de Pablos-Heredero, C. (2020). A three-wave longitudinal study of moderated mediation between perceptions of politics and employee turnover intentions: The role of job anxiety and political skills. Revista de Psicología del Trabajo y de las Organizaciones, 36(1), 1-14.
  28. Hair, J. F., Risher, J. J., Sarstedt, M., & Ringle, C. M. (2019). When to use and how to report the results of PLS-SEM. European Business Review, 31(1), 2-24.
  29. Hair, J. F., Sarstedt, M., & Ringle, C. M. (2019). Rethinking some of the rethinking of partial least squares. European Journal of Marketing, 53(4), 566-584.
  30. Hair, J., & Alamer, A. (2022). Partial Least Squares Structural Equation Modeling (PLS-SEM) in second language and education research: Guidelines using an applied example. Research Methods in Applied Linguistics, 1(3), 100027.
  31. Hariani, S., & Fakhrorazi, A. (2021). Determinants of financial reporting quality: an empirical study among local governments in Indonesia. International Journal of Economics and Finance Studies, 13(2), 82-107.
  32. Harun, H., Mir, M., Carter, D., & An, Y. (2019). Examining the unintended outcomes of NPM reforms in Indonesia. Public Money & Management, 39(2), 86-94.
  33. Henseler, J., Hubona, G., & Ray, P. A. (2016). Using P.L.S. path modeling in new technology research: updated guidelines. Industrial Management & Data systems, 116(1), 2-20.
  34. IPSASB (2014). The Conceptual Framework for General Purpose Financial Reporting by Public Sector Entities, pp. 1-120.
  35. Jordan, S. L., Hochwarter, W. A., Ferris, G. R., & Ejaz, A. (2018). Work grit as a moderator of politics perceptions: Workplace outcomes relationships: a three-study convergent investigation. Career Development International, 23(6–7), 576–594.
  36. Jyoti, J., & Dev, M. (2015). The impact of transformational leadership on employee creativity: the role of learning orientation. Journal of Asia Business Studies, 9(1), 78-98.
  37. Kateb, I. (2024). The bridge to quality financial reporting: Audit committees’ mediating role in IFRS implementation for emerging markets. Journal of Corporate Accounting & Finance, 35(1), 250-268.
  38. Kelley, K., Clark, B., Brown, V., & Sitzia, J. (2003). Good practice in the conduct and reporting of survey research. International Journal for Quality in Health Care, 15(3), 261-266.
  39. Kezaabu, S., Nkundabanyanga, S. K., Bananuka, J., & Kabuye, F. (2024). Managerial competences and integrated reporting practices: perception-based evidence from Uganda. Journal of Accounting in Emerging Economies, 14(1), 157-186.
  40. Khanchel, I., Lassoued, N., & Ferchichi, O. (2025). Are political connections a curse for banks of the MENA region? The moderating effect of ownership structure. International Journal of Emerging Markets, 20(1), 387-406.
  41. Kheriollahi, F., & Ghorbani, A. (2023). The Role of Accountability in Determining the Relationship between Financial Reporting Quality and the Performance of Public Organizations. Journal of Accounting and Management Vision, 6(81), 129-145.
  42. Kicová, M. (2017). Financial reporting for public sector entities by conceptual framework. In New Trends in Process Control and Production Management (pp. 247-252). CRC Press.
  43. Kilango, R., & Mutalemwa, D. (2024). Effect of Leadership Accountability on Improving Service Delivery in the Public Sector in Tanzania: A Case Study of Ocean Road Cancer Institute, Dar es Salaam. African Journal of Empirical Research, 5(3), 697-709.
  44. Krejcie, R. V., & Morgan, D. W. (1970). Sample size determination table. Educational and Psychological Measurement, 30, 607-610.
  45. Likert, R., Roslow, S., & Murphy, G. (1934). A simple and reliable method of scoring the Thurstone attitude scales. The Journal of Social Psychology, 5(2), 228-238.
  46. Likert, R., Roslow, S., & Murphy, G. (1993). A simple and reliable method of scoring the Thurstone attitude scales. Personnel Psychology, 46(3), 689-690.
  47. Liu, C., Xu, S., Zhang, B., Siu, O. L., & Fan, J. (2024). Why and when employees ostracize their leaders: the effect of leader political act and integrity trustworthiness of the leader. European Journal of Work and Organizational Psychology, 33(6), 727-743.
  48. Madawaki, A., Ahmi, A., & Ahmad, H. N. (2022). Internal audit functions, financial reporting quality and moderating effect of senior management support. Meditari Accountancy Research, 30(2), 342-372.
  49. Magno, F., Cassia, F., & Ringle, C. M. (2024). Guest editorial: Using partial least squares structural equation modeling (PLS-SEM) in quality management. The TQM Journal, 36(5), 1237-1241.
  50. Mang’ana, K. M., Ndyetabula, D. W., & Hokororo, S. J. (2023). Financial management practices and performance of agricultural small and medium enterprises in Tanzania. Social Sciences & Humanities Open, 7(1), 100494.
  51. Martilla, J. A., & James, J. C. (1977). Importance-performance analysis. Journal of Marketing, 41(1), 77–79. https://doi.org/10.1177/002224297704100112
  52. Matekele, C. K., & Komba, G. V. (2019). Factors influencing implementation of accrual based International Public Sector Accounting Standards in Tanzanian local government authorities. Asian Journal of Economics, Business and Accounting, 13(3), 1-25.
  53. Matekele, C. K., Mbogela, C. S., & Keregero, C. M. (2025). The Effects of Accounting Language and Staff Capacity on Local Government Authorities’ Financial Reporting Quality. SEISENSE Journal of Management, 8(1), 98-118.
  54. Mbelwa, L. H., Adhikari, P., & Shahadat, K. (2019). Investigation of the institutional and decision-usefulness factors in the implementation of accrual accounting reforms in the public sector of Tanzania. Journal of Accounting in Emerging Economies, 9(3), 335-365.
  55. Mkonya, V. L., Jintian, Y., Nanthuru, S. B., & Jinyevu, S. A. (2018). Analysis of top management support and individual factors influence on accounting information system and its impact on the accounting information quality for projects. International Journal of Management Science and Business Administration, 4(3), 19-29.
  56. Muraina, S. A., & Dandago, K. I. (2020). Effects of implementation of International Public Sector Accounting Standards on Nigeria’s financial reporting quality. International Journal of Public Sector Management, 33(2/3), 323-338.
  57. National Audit Office Tanzania (2017). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2015/16. United Republic of Tanzania, Dodoma.
  58. National Audit Office Tanzania (2018). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2016/17. United Republic of Tanzania, Dodoma.
  59. National Audit Office Tanzania (2019). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2017/18. United Republic of Tanzania, Dodoma.
  60. National Audit Office Tanzania (2021). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2019/20. United Republic of Tanzania, Dodoma.
  61. National Audit Office Tanzania (2022). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2020/21. United Republic of Tanzania, Dodoma.
  62. National Audit Office Tanzania (2023). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2021/22. United Republic of Tanzania, Dodoma.
  63. National Audit Office Tanzania (2024). Annual General Report of the Controller and Auditor General on the Audit of Local Government Authorities for the Financial Year 2022/23. United Republic of Tanzania, Dodoma.
  64. Neel, M., & Safdar, I. (2024). Financial statement relevance, representational faithfulness, and comparability. Review of Quantitative Finance and Accounting, 62(1), 309-339.
  65. Ngo, D. N. P., & Nguyen, C. V. (2024). Does the CEO’s financial and accounting expertise affect the financial reporting quality? Evidence from an emerging economy. Journal of Financial Reporting and Accounting, 22(3), 653-676.
  66. Niklasson, B., Dawson, S., Bågenholm, A., & De Fine Licht, J. (2024). Misconduct and whistleblowing in political parties: A party loyalty dilemma. Party Politics, 1-12
  67. Omer, T. C., Shelley, M. K., & Tice, F. M. (2020). Do director networks matter for financial reporting quality? Evidence from audit committee connectedness and restatements. Management Science, 66(8), 3361-3388.
  68. Orobia, L., Nturaninshaba, R., Bananuka, J., & Reuel Dakung, K. (2023). The association between accountant’s competences, organisational culture and integrated reporting practices. Journal of Financial Reporting and Accounting, 21(2), 193-216.
  69. Oulasvirta, L. (2014). The reluctance of a developed country to choose International Public Sector Accounting Standards of the IFAC. A critical case study. Critical Perspectives on Accounting, 25(3), 272-285.
  70. Petruzzelli, S., & Badia, F. (2024). The quality assessment of stakeholder engagement disclosure in the EU mandatory non-financial reporting framework. Journal of Applied Accounting Research, 25(1), 126-148.
  71. Pham, Q. T., Tran, T. G. T., Bui, T. T. H., Nguyen, T. P. L., & Bui, A. T. (2023). Impacts of tax enforcement and independent audit on financial reporting quality through the internal control effectiveness: Evidence from Vietnam enterprises. Cogent Social Sciences, 9(1), 2175486.
  72. Pham, Q. T., Truong, T. H. D., Ho, X. T., & Nguyen, Q. T. (2022). The role of supervisory mechanisms in improving financial reporting quality by Vietnam public non-business unit. Cogent Business & Management, 9(1), 2112538.
  73. Podsakoff, P. M., MacKenzie, S. B., & Podsakoff, N. P. (2012). Sources of method bias in social science research and recommendations on how to control it. Annual review of psychology, 63(1), 539-569.
  74. PwC (2018). Pulling fraud out of the shadows: global economic Crime and fraud survey 2018. Available at: https://www.pwc.es/es/publicaciones/deals/assets/encuesta-mundial-fraude-delito-economico-2018.pdf
  75. Rakhman, F., & Wijayana, S. (2019). Determinants of financial reporting quality in the public sector: Evidence from Indonesia. The International Journal of Accounting, 54(03), 1950009.
  76. Ringle, Christian M., Wende, Sven, & Becker, Jan-Michael. (2024). SmartPLS 4. Bönningstedt: SmartPLS. Retrieved from https://www.smartpls.com
  77. Sellami, Y. M., & Gafsi, Y. (2020). Public management systems, accounting education, and compliance with international public sector accounting standards in sub-Saharan Africa. International Journal of Public Sector Management, 33(2/3), 141-164.
  78. Shmueli, G., Ray, S., Estrada, J. M. V., & Chatla, S. B. (2016). The elephant in the room: Predictive performance of PLS models. Journal of business Research, 69(10), 4552-4564.
  79. Shmueli, G., Sarstedt, M., Hair, J. F., Cheah, J. H., Ting, H., Vaithilingam, S., & Ringle, C. M. (2019). Predictive model assessment in PLS-SEM: guidelines for using PLSpredict. European Journal of Marketing, 53(11), 2322-2347.
  80. Sulu-Gambari, W., Stafford, A., & Stapleton, P. (2018). Public accountability reform in a Nigerian ministry. Qualitative Research in Accounting & Management, 15(4), 485-509.
  81. Susanto, A. (2017). The influence of accounting information system quality to accounting information quality and its implications to the good study program governance. Medwell Journals, 27, 5767-76.
  82. Syafaruddin, S. (2024). Examining the Role of Leadership in Improving Transparency and Accountability in Local Government. International Journal of Economics and Management Research, 3(2), 131-146.
  83. Tanjeh, M. S. (2016). Factors influencing the acceptance of international public sector accounting standards in Cameroon. Accounting and Finance Research, 5(2), 1-71.
  84. Thoa, D. T. K., & Nhi, V. V. (2022). Improving the quality of the financial accounting information through strengthening of the financial autonomy at public organisations. Journal of Asian Business and Economic Studies, 29(1), 66-82.
  85. Thomas, D. A. (2018). Leadership and accountability. American Anthropologist, 120(4), 641-646.
  86. Tran, Y. T., & Hoang, T. C. (2024). Transformational leadership and public employee performance: The mediating roles of employee participation and public service motivation. International Review of Administrative Sciences, 90(4), 793-809.
  87. Tran, Y. T., Nguyen, N. P., & Hoang, T. C. (2021). Effects of leadership and accounting capacity on accountability through the quality of financial reporting by public organisations in Vietnam. Journal of Asia Business Studies, 15(3), 484-502.
  88. Tran, Y. T., Nguyen, N. P., & Hoang, T. C. (2021). The role of accountability in determining the relationship between financial reporting quality and the performance of public organisations: Evidence from Vietnam. Journal of Accounting and Public Policy, 40(1), 106801.
  89. Tummers, L., & Knies, E. (2016). Measuring public leadership: Developing scales for four key public leadership roles. Public Administration, 94(2), 433-451.
  90. Umbach, P. D. (2005). Getting back to the basics of survey research. New directions for Institutional Research, 2005(127), 91-100.
  91. Van der Wal, Z., De Graaf, G., & Lasthuizen, K. (2008). What’s valued most? Similarities and differences between the organizational values of the public and private sector. Public Administration, 86(2), 465-482.
  92. Yammarino, F. J., & Dubinsky, A. J. (1994). Transformational leadership theory: Using levels of analysis to determine boundary conditions. Personnel Psychology, 47(4), 787-811.
  93. Zhang, K., Zhao, B., & Yin, K. (2024). When leaders acknowledge their own errors, will employees follow suit? A social learning perspective. Journal of Business Ethics, 189(2), 403-421.
DOI: https://doi.org/10.58548/2025abmj31.5367
Submitted:
Published: June 30, 2025