Understanding Malaysian State Governments Fiscal Behavior: The Role Of Intergovernmental Transfers

As of late, several state governments in Malaysia have been identified as having serious difficulty in meeting their financial needs, to the extent of the government being qualified as on the verge of bankruptcy. One of the explanations put forward is that state governments have been acting irresponsibly in managing finances. Thus, the question that ensues is: why do state governments behave in such irresponsible manner fiscally and financially in the first place? In this paper, the authors relate the financial difficulties faced by these governments within the confines of the institutional and political environment currently in place within the country.