Municipal Bankruptcy: Pilot Experience from Czech Republic

Local governments are important parts of public sector and they play significant role in daily life of residents. Their role is usually underestimated in comparison with central government tasks and responsibilities. Residents usually realize the real importance of municipal role when municipalities are in financial problems or even bankruptcy and for these reasons they have to restrict their services. This research paper focuses on the issue of financially distressed Czech municipalities and relevant financial areas or indicators in period prior financial problems of municipalities similar to a bankruptcy. This case study is specific due to the fact that this country misses bankruptcy legislation for municipalities and small total number of already existing cases of municipal bankruptcy due to limited time period of their higher autonomy after 1989. Thus the research sample of comparable cases is very limited and this paper serves as a pilot case study. The research for this paper is focused on the financial management of municipalities from the perspective of negative financial situations and the preceding phase to reveal and achieve certain preliminary findings and experience as a pilot lesson for financial management improvements and further exploration and research.