Accounting restatements, governance and municipal debt financing

Baber, William R.; Gore, Angela K.; Rich, Kevin T.; Zhang, Jean X.

doi:10.1016/j.jacceco.2013.08.003

Cited by 98 publications

(85 citation statements)

References 37 publications

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“…The remaining control variables are selected based on Baber and Gore (2008) and Baber et al (2013). 16 GFOA is an indicator variable equal to 1 if the issuing government received the Government Finance Officers Association (GFOA) certificate of achievement for excellence in financial reporting, and 0 otherwise.…”

Section: Methodsmentioning

confidence: 99%

“…13 See Benson, Marks, and Raman (1991); Fairchild and Koch (1998); Baber and Gore (2008); Reck and Wilson (2014). 14 See Wilson and Stewart (1990); Vijayakumar (1995) Baber, Gore, Rich, and Zhang (2013).…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Their results imply financial reporting regulation reduces contracting costs between borrowers and lenders by decreasing information asymmetry. In a follow up study, Baber et al (2013) look at governments with restatement disclosures and find mean municipal debt yields are greater after the announcement. This is consistent with higher debt yields resulting from a higher information asymmetry environment.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

“…Mead (2011) surveys users of government financial reports and discovers 89 percent of respondents find the information useful if it is received within 45 days, but only 9 percent of respondents find the information useful if it is delayed for six months or more. Research establishes that investors value higher-quality government financial reports that help reduce information asymmetry (e.g., Baber and Gore 2008;Baber et al 2013). One of the important attributes of quality is timeliness, so timelier reports should be highly valued by users of those reports.…”

Section: Hypothesis Developmentmentioning

confidence: 99%

See 3 more Smart Citations

Government Reporting Timeliness and Municipal Credit Market Implications

Henke¹,

Maher

2016

Journal of Governmental &Amp; Nonprofit Accounting

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Municipal governments are often very slow in producing and disclosing financial statements, with the average time for filing compulsory statements taking over twice as long as the SEC-mandated time for publicly traded corporations. There are typically no governmental rules or explicit penalties connected with extended financial reporting. We propose this delay in reporting is likely to have negative capital market effects for the municipality and we investigate the credit market consequences of delayed reporting. Our empirical results are consistent with delayed reporting resulting in lower bond ratings for municipalities indicating a negative interpretation by bond rating analysts. Furthermore, we also find a higher yield for the government's bonds consistent with bond market investors also viewing this delay as a negative signal with respect to the particular government entity. Our results add to the literature on government reporting as well as the literature regarding the determinants of government bond pricing.

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Section: Methodsmentioning

confidence: 99%

Section: Hypothesis Developmentmentioning

confidence: 99%

Section: Hypothesis Developmentmentioning

confidence: 99%

Section: Hypothesis Developmentmentioning

confidence: 99%

See 2 more Smart Citations

Government Reporting Timeliness and Municipal Credit Market Implications

Henke¹,

Maher

2016

Journal of Governmental &Amp; Nonprofit Accounting

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“…On the other hand, a firm with a GI of six has all the above governance attributes. Composite governance indices like the one utilised in this study are used widely in the literature (Baber et al, 2012;Baber et al, 2013;Brown et al, 2011). Such a governance index is based on the assumption that the elements of governance included in the index are equally important and are complements rather than substitutes (Brown et al, 2011).…”

Section: Governance Indexmentioning

confidence: 99%

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

Kabir

Rahman

2016

Journal of Contemporary Accounting & Economics

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A major concern with the adoption of International Financial Reporting Standards (IFRS) is the accounting discretion allowed under the IFRS, and its potential opportunistic use by managers. We examine the role of corporate governance in the accounting discretion inherent in goodwill impairment decisions under the IFRS. More specifically, we investigate whether, in Australia, stronger governance strengthens associations between economic factors and goodwill impairment loss but weakens associations between contracting incentives and goodwill impairment loss. Using data from 2007 to 2012, we find evidence consistent with the notion that stronger governance enhances the associations between economic factors and goodwill impairment loss. However, we find that strong governance cannot completely eliminate the opportunistic use of discretion in an impairment decision, especially when pre-impairment income is negative, and when the impairment occurs in the first year of a CEO's tenure. Our results are robust with regards to alternative measures of the dependent variable, firm performance variables, and the governance variable, even after controlling for potential self-selection biases.JEL Classification: G34, M41

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Social Capital and the Municipal Bond Market

Tang

Jaggi

2016

J Bus Ethics

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We examine the influence of social capital in the municipal bond market. Defined as the norms and networks that encourage cooperation, social capital is a social construct which captures a region's level of altruism, trustworthiness, and propensity to honor obligations. We expect that municipalities with high social capital are more trustworthy and likely to honor their debt obligations, which will result in lower bond yields. Our findings confirm that the bonds issued by municipalities located in high social capital counties exhibit lower yields compared to the municipalities located in low social capital counties. Our findings are also supported by bond prices in the secondary market, which shows that bonds from the municipalities located in high social capital regions have higher prices. Additional tests reveal that the influence of social capital is stronger for general obligation bonds, suggesting that social capital matters more for bonds where the willingness of municipalities to pay taxes is an important factor. Lastly, we document that the bonds of municipalities in high social capital areas are less likely to have insurance, suggesting that social capital may act as a substitute for bond insurance.

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Accounting restatements, governance and municipal debt financing

Cited by 98 publications

References 37 publications

Government Reporting Timeliness and Municipal Credit Market Implications

Government Reporting Timeliness and Municipal Credit Market Implications

The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia

Social Capital and the Municipal Bond Market

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