Abstract:

The objective of this research is to identify the determinants of the financial efficiency of small Portuguese municipalities in the period from 2008 to 2016. For this purpose, the determinants were grouped into three categories: sociodemographic, political and budgetary. The results obtained showed that the financial efficiency of the municipalities is influenced by several sociodemographic determinants, such as location, purchasing power index, tourism and the unemployment rate. Regarding the budgetary determinants, it was found that tax revenue and financial independence positively influence the financial efficiency of municipalities. Staff costs have a negative effect on it. As regards the political determinants, it can be highlighted that the results do not present any statistical significance. The evidence obtained can contribute to the municipal leaders to define policies and measures that allow to increase the financial efficiency.