Effects of the disclosure of rankings and ratings on municipalities accounting practices

Abstract

Rankings and indicators have become increasingly widespread in society as tools for managing organizational performance. Despite their extensive use, their effects have been relatively unexplored. This research aimed to assess how the disclosure of rankings and indicators developed by external stakeholders affects accounting practices in Municipalities. To achieve this, a qualitative and interpretative research approach was employed, covering 53 municipalities. Semi-structured interviews were the primary data collection method, with organizational legitimacy as the theoretical lens. The study identified factors contributing to changes in accounting practices following the disclosure of rankings: (i) support from top management; (ii) perception of monitoring or coercion; (iii) available resources; (iv) software influence; (v) ranking position; and (vi) clarity of evaluated indicators. Furthermore, Municipalities employ strategies such as information manipulation in response to the publication of ranking results. The pursuit of legitimacy through ranking also influences the actions of those ranked, particularly in the extent of efforts made to improve their classification. The research contributes by demonstrating to ranking coordinators how defining metrics that better illustrate the reality of those ranked can shape stakeholders' perception of the relevance of the defined metrics. The results have implications for ranking and indicator developers who should be mindful of the effects caused by disclosure and the definition of metrics used, especially regarding ceremonial adoption and manipulations for the purpose of legitimization.