The case for mandatory municipal disclosure: Do seasoned municipal bond yields impound publicly available information?

Marquette, R. Penny; Wilson, Earl R.

doi:10.1016/0278-4254(92)90007-k

Cited by 19 publications

(7 citation statements)

References 23 publications

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“…This is true as long as the population change has a significant number of skilled new residents who can increase the level of economic activity in the community. This finding supports the results of other studies (such as Cluff Volume 28 Number 4 200235 and Farnham, 1984, and Marquette and Wilson , 1992. This means that a good percentage of the population should have the skills needed for employment in order to contribute to the locality's economic base.…”

Section: Resultssupporting

confidence: 92%

An empirical analysis of net interest cost, the probability of default and the credit risk premium: a case study using the Commonwealth of Virginia

2002

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Explains the rating system for US municipal bonds and its effect on borrowing costs, reviews relevant research and provides a study of the factors affecting grading by rating agencies in Virginia using 1995 data. Explains the methodology and presents the results, which identify five significant determinants of favourable ratings. Shows that net interest costs are lower when other rates of interest are low, real estate taxes are high (though not excessive), total municipal debt levels are low and credit risks are low. Confirms that bond ratings capture additional information and that a drop in ratings will raise net interest costs substantially. Considers consistency with other research and the implications of the findings for participants in the municipal bond market.

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Section: Resultssupporting

confidence: 92%

An empirical analysis of net interest cost, the probability of default and the credit risk premium: a case study using the Commonwealth of Virginia

2002

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“…Consistent with this finding, Ingram, Brooks, and Copeland [1983] find that credit rating changes are more informative in the municipal market, relative to the corporate market, because municipal financial statements are produced with a greater lag and information processing costs are significantly higher. In contrast, Marquette and Wilson [1992] find that the municipal bond market anticipates future credit rating changes using publicly available information, suggesting that municipal disclosure is useful in predicting credit risk.…”

Section: Background and Related Literaturementioning

confidence: 99%

The Effect of Credit Ratings on Disclosure: Evidence from the Recalibration of Moody's Municipal Ratings

Gillette

Samuels

Zhou

2020

J of Accounting Research

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This paper examines how credit rating levels affect municipal debt issuers' disclosure decisions. Using exogenous upgrades in credit rating levels caused by the recalibration of Moody's municipal ratings scale in 2010, we find that upgraded municipalities significantly reduce their disclosure of required continuing financial information, relative to unaffected municipalities. Consistent with a reduction in debtholders' demand for information driving these results, the reduction in disclosure is greater when municipal bonds are * Sloan School of Management, MIT; † The Wharton School, University of Pennsylvania.Accepted by Christian Leuz. We gratefully acknowledge helpful comments and suggestions from John Core, held by investors who relied more on disclosure ex ante. However, we also find that the reduction in disclosure does not manifest when issuers are monitored by underwriters with greater issuer-specific expertise and when issuers are subject to direct regulatory enforcement through the receipt of federal funding. Overall, our results suggest that higher credit rating levels lower investor demand for disclosure in the municipal market, and highlight the role of underwriters and direct regulatory enforcement in maintaining disclosure levels when investor demand is low. JEL codes: G24; G28; H74; M40; M41

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“…7 Several features distinguish it from the corporate bond market. First, information asymmetries are likely to be greater in the municipal market (Marquette & Wilson, 1992). The sheer number of issues, and issuers in the municipal market makes it distinctly unique.…”

Section: Literature Review and Hypothesesmentioning

confidence: 99%

Does underwriter reputation matter in the municipal bond market?

Daniels

Vijayakumar

2007

Journal of Economics and Business

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The case for mandatory municipal disclosure: Do seasoned municipal bond yields impound publicly available information?

Cited by 19 publications

References 23 publications

An empirical analysis of net interest cost, the probability of default and the credit risk premium: a case study using the Commonwealth of Virginia

An empirical analysis of net interest cost, the probability of default and the credit risk premium: a case study using the Commonwealth of Virginia

The Effect of Credit Ratings on Disclosure: Evidence from the Recalibration of Moody's Municipal Ratings

Does underwriter reputation matter in the municipal bond market?

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