Is Portugal Gaming with the Performance Feedback of the Late Payments Directive? Evidence from the Portuguese Municipalities

This chapter delves into the performance feedback of the Late Payments Directive (LPD) in Portugal, focusing on the potential gaming strategies employed by Portuguese municipalities. The study examines the average payment period (APP) as the key indicator for assessing compliance with the LPD and questions the reliability of this measure due to methodological inconsistencies. The analysis reveals that while the APP has been decreasing over time, there are significant discrepancies between municipalities that comply with the 30-day threshold and those that do not. The research highlights the importance of transparent and comparable accounting information in monitoring financial sustainability. It also underscores the need for the European Commission to define a common methodology to ensure the effectiveness of the LPD. The study uses a quantitative approach, analyzing data from 308 Portuguese local governments from 2014 to 2019, and employs panel data regression models to assess the relationship between different debt components and total debt. The findings suggest that there may be short-term commercial liabilities not considered in the current APP calculation, raising questions about the accuracy of performance reporting. This chapter provides valuable insights into the challenges of implementing the LPD and the potential for gaming in performance measurement within the public sector.