Skip Krueger is an Assistant Professor at the Department of Public Administration, University of North Texas, 1155 Union Circle #310617, Denton, TX 76203-5017, USA. He can be reached at Skip.Krueger@unt.edu. Robert W. Walker is an Assistant Professor at the Department of Political Science, Center for Applied Statistics, Washington University in St. Louis, St. Louis, MO 63130-4899, USA. He can be reached at email@example.com.
Management Practices and State Bond Ratings
Article first published online: 2 DEC 2010
© 2010 Public Financial Publications, Inc.
Public Budgeting & Finance
Volume 30, Issue 4, pages 47–70, Winter 2010
How to Cite
KRUEGER, S. and WALKER, R. W. (2010), Management Practices and State Bond Ratings. Public Budgeting & Finance, 30: 47–70. doi: 10.1111/j.1540-5850.2010.00968.x
- Issue published online: 2 DEC 2010
- Article first published online: 2 DEC 2010
One of the central claims of public administration is that management matters for the performance of public entities. Quantifying the impact of organizational management is thus central to the empirical evaluation of this claim. Utilizing novel features of the Government Performance Project (GPP), we assess the impact of state-level management practices on the credit quality of US states. The central challenge—that both the GPP data and bond ratings take the form of ordinal grades—suggests a common solution utilizing multiple indicators of a latent construct (management capacity and credit quality) with appropriate measurement models. After describing the characteristics of the measurement approach, we derive management capacity scores from the GPP data and credit quality scores using bond ratings from the three rating agencies. These derived scores then allow us to test linkages between credit quality of the US states and broad aspects of their relative management capacity. On the whole, we show that financial management capacity influences credit quality, while the evidence is less clear that other forms of management capacity matter.