The Korea Local Administration Review

This study focused on the financial capability of local governments to analyze the factors that affect the returning of the specific grants. According to the panel data analysis, contrary to the previous studies, the financial capability of local governments itself positively affects to reduce the level of returning of the grants. Especially, in terms of the grants from the central government, the financial capability had statistical significant on all types of municipal governments.
The wealthier local governments are more likely to have larger policy programs that require bigger specific grant. In this cases, both grantees and grantors pay high attention to the implementation efficiency of the programs. It is because these programs are considered important for the local governments as a grantee to build power resources and develop a local economy, also cannot be neglected to the central or sub-central government as a grantor due to the political accountability. As a result, the higher the financial capability is, the lower the returning level of the grant is likely to. The role of local government as a grantee has to be more concerned to secure the efficient implementation of the specific grant as much as the capacity of supervision and monitoring of central or sub-central government as a granter.

□ Keywords: Financial Capability, Returning of Specific Grants, Local Finance