City responses to economic downturns 2003 to 2009: Statistical and textual analyses of comprehensive annual financial reports

Abstract

This paper analyzes the impact of economic downturns on the revenue and expense sides of city financing for the period 2003 to 2009 using a convenience sample of the audited end of year financial reports for thirty midsized US cities. The analysis focuses on whether and how quickly and how extensively revenue and spending directions from past years are altered by recessions. A seven year series of Comprehensive Annual Financial Report (CAFR) data serves to explore whether cities' revenues and spending, especially the traditional property tax and core functions such as public safety and infrastructure withstood the brief 2001 and the persistent 2007 recessions? The findings point to consumption (spending) over stability (revenue minus expense) for the recession of 2007, particularly in 2008 and 2009.

Budgetary responses to COVID-19: the case of South Korea

“…Second, the approval ratings for the ruling party was high, which served as an impetus for the Parliament to pass the budget. Many studies have investigated state or municipal responses to economic downturns or recessions (Darvas, 2010;Sacco and Busche e, 2013;Campbell and Sances, 2013;Cary and Bush, 2018). Poterba (1994) demonstrated that, facing economic downturn and fiscal crises, state fiscal institutions adjust to address budget deficits.…”

Linguistic Tone and Internal Control Reporting: Evidence from Municipal Management Discussion and Analysis Disclosures

“…On one hand, existing research suggests that municipal officials and managers have incentives to signal on financial reporting in order to reduce information asymmetries with various stakeholders (Baber 1983;Evans and Patton 1987). A potential mechanism for signaling performance is through the textual content in municipal MD&A disclosures (Sacco and Bushee´2013). If MD&A language contains useful information about financial reporting systems, one possibility would be an observation of associations between MD&A linguistic tone and future internal control quality.…”

“…2 Under GASB 34, the MD&A in annual financial reports is ''designed to give readers a clearer picture of the social and economic factors affecting the fiscal health of the reporting body'' (Guo, Fink, and Frank 2009). Since municipal managers have incentives to signal about financial reporting to reduce information asymmetries with stakeholders (Evans and Patton 1987), one potential mechanism is through textual content in the MD&A (Sacco and Bushee´2013).…”

“…We contribute to the accounting literature in several ways. First, while many papers examine the linguistic tone of corporate MD&A disclosures (Loughran and McDonald 2011;Lehavy, Li, and Merkley 2011;Brown and Tucker 2011;Davis and Tama-Sweet 2012;Mayew et al 2015, among others), we know relatively little about the role of qualitative disclosure information in the governmental setting (Rich, Roberts, and Zhang 2016;Sacco and Bushee´2013;Guo et al 2009;Marsh, Montondon, and Kemp 2005). Our paper utilizes automated linguistic techniques (Loughran and McDonald 2016;Fisher, Garnsey, Goel, and Tam 2010) to extend current research of MD&A disclosures to the municipal context.…”

“…2200) the MD&A ''should provide users with the information they need to help them assess whether the government's financial position has improved or deteriorated as a result of the year's operations.'' Although prior literature suggests that textual content in municipal MD&A disclosures is useful in signaling recessionary times (Sacco and Bushee´2013), there is little empirical evidence on the consequences of linguistic characteristics within municipal MD&A disclosures.…”