Purpose Municipally-owned enterprises (MOEs) are hybrid organisations exposed to both institutional pressures and integrity challenges. This study examines whether municipal ownership enhances accounting quality and how this relationship changes when municipal shareholders have documented corruption episodes. Design/methodology/approach The study analyses 685 Italian enterprises wholly or partly owned by municipalities with over 15,000 inhabitants, using a cross-sectional logistic regression to examine the relationship between municipal ownership, corruption exposure, and accounting manipulation risk. Findings Majority municipal ownership is associated with a lower likelihood of accounting manipulation, consistent with stronger institutional monitoring. However, there is a positive association between a greater share of the enterprise being owned by corrupt municipalities and manipulation risk. Together, results indicate that the ability of municipal ownership to reduce manipulation is contingent on institutional integrity. Originality/value The study advances research on hybrid organisations by showing that municipal ownership reduces accounting manipulation risk only when municipal owners are not affected by corruption. In corrupt settings, municipal ownership may reshape institutional pressures, reorienting organisational practices toward particularistic interests and increasing manipulation risk. This finding reframes municipal ownership as a conditional governance mechanism whose effectiveness depends on institutional integrity.
Monteduro et al. (Mon,) studied this question.
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