Financial conditions and financial distress in Higher Education: a narrative literature review

Many countries have recently introduced several incisive reforms in higher education sector, aiming at improving its performance through the introduction of “business-like” management practices into public organisations (BOGT and SCAPENS, 2012). The main aims of these reforms were enhancing institutional autonomy and stressing quality assurance and accountability (NEAVE, 1988; OECD, 2003, 2009; EURYDICE, 2000; 2008), producing several relevant effects, such as a different relationship between central government and each state university, the decentralisation of responsibilities and, especially, an increased attention given to financial budgeting. In particular, central governments are reducing their financial support to universities (as well as local governmental entities), declaring that future assignments of funds will be based on assessments of their performance. By this way, a dominant topic in the literature in recent years is the augmented use of performance information in the public sector. Generally speaking, even if there are divergent opinions about the effectiveness of performance-based accountability structures, scholars have pointed out that these performance-based mechanisms could support, in some ways, both reform state budgets and change service delivery (Hunt, 2008; Kelly et al, 2010).This reform movement aims to get universities out from under bureaucratic regulations, which in the past have obstructed their ability to respond to societal demands, and at the same time to hold them accountable for serving the stakeholders’ needs. Different pieces of research have investigated the effectiveness of these performance-based reforms through both case studies (BANTA et al, 1996) and comprehensive and thorough analyses of public colleges and universities (RABOVSKY, 2012). Assuming as background studies concerning the above-mentioned link between performances and funding, this study would contribute to current literature by investigating the key theoretical elements and methods used to analyze financial conditions and financial distress of public universities, while previous literature has mainly focused on local governmental entities (CARMELI, 2003, 2008; JONES and WALKER, 2007).