Accounting information and municipal bond net interest cost: An empirical evaluation

Apostolou, Nicholas G.; Reeve, James M.; Giroux, Gary

doi:10.1016/0278-4254(84)90009-7

Cited by 17 publications

(3 citation statements)

References 10 publications

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“…Given that GAPerf reflects the longer-term operating decisions of the government, it could also be influenced by actions of some governments to boost short-term financial performance (i.e., GFPerf ) by shifting the cost of current services to future periods. Governments have a history of deferring the cost of current services by offering more liberal vacation and sick leave policies, reducing pension contributions (Chaney, Copley, and Stone 2002;Apostolou, Reeve, and Giroux 1984), and deferring maintenance on capital plant. Under the pre-Statement No.…”

Section: Discussion and Summarymentioning

confidence: 99%

The Relative Influence of Fund-Based and Government-Wide Financial Information on Municipal Bond Borrowing Costs

Reck

Wilson

2014

Journal of Governmental &Amp; Nonprofit Accounting

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Section: Discussion and Summarymentioning

confidence: 99%

The Relative Influence of Fund-Based and Government-Wide Financial Information on Municipal Bond Borrowing Costs

Reck

Wilson

2014

Journal of Governmental &Amp; Nonprofit Accounting

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“…2 See Cole and Officer (1981), Hsueh and Chandy (1989), Apostolou, Reeve and Giroux (1984), Bland (1987), Simonsen, Robbins and Helgerson (2001). 3 See Peng (2002).…”

Section: Econometric Methodology and Variablesmentioning

confidence: 99%

On the Value of Municipal Bond Insurance: An Empirical Analysis

Lai

Zhang

2013

Financial Market

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Using a large sample of municipal bond data from 2001 to 2010 in the U.S., this paper documents the time variation of the value of municipal bond insurance, estimated from the insured and uninsured bonds yield at issue differentials. We find that insured municipal bonds carry significant lower yields at issue compared to those of the equivalent uninsured bonds before 2008. However, this cost saving disappeared with the aftermath of the subprime credit crisis. We find that the supply of bonds and the level of market interest rates to have significant positive impacts on the time‐varying value of bond insurance. We also detect asymmetric response of these yield differentials to rises and declines of market interest rates. Economic intuition suggests that the value of municipal bond insurance is a function of business cycles but our tests support the contrary, which may be explained by the habitat preference of municipal bonds issues.

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“…Similar to prior research (Pridgen and Wilder, 2013;Denison et al, 2007;Apostolou et al, 1984), we also include socio-economic attributes that can affect bond interest cost (PerCapIncome; Ln Population; Unemployment Rate). PerCapIncome is personal income per capita.…”

Section: Descriptive Of Variablesmentioning

confidence: 99%

Regulated public accessibility to municipalities’ financial reports and bond interest cost

Cha,

Plante,

Ragland

2024

JPBAFM

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PurposeIn this study, we examine regulated public accessibility to municipalities’ financial reports and bond interest cost. In particular, we examine whether there is information content in a component of a constrained filing period that is useful to municipal bond market participants. The component of a filing period that we focus on is the period of time between an audit report date and a regulated public accessibility date.Design/methodology/approachTo explore our research question, we collect a sample of observations from municipalities that: (1) are required to post annual/audit financial reports on a centralized state-level repository that includes a “transparent” date stamp on when reports are made publicly available and (2) have issued general obligation bonds. Our sample is limited to one observation per municipality. The sample period is 2006–2019. In terms of approach, we use an ordinary least square (OLS) regression model to empirically test whether the time period between municipalities’ audit report date and state-required repository filing date is associated with general obligation bond interest cost.FindingsWe find support for the idea that there is information content in a component of a constrained filing period. In particular, we hypothesize and find a positive association between the time period between an audit report date and a state filing date and general obligation bond interest cost. Seemingly, this component of time may provide something unique or not available in other components of a constrained filing period (e.g. the fiscal year-end date to the audit report date). In post hoc analyses, we also find that both components of the constrained filing period in our setting (i.e. the audit report date to state filing date and the fiscal year-end date to audit report date) need to be considered for either of the components to be significant. Moreover, although both components are necessary, the audit report date to state filing date component appears to have a slightly stronger association (in terms of statistical significance) with general obligation bond interest costs.Research limitations/implicationsTo our knowledge, Illinois is the only state that provides a date stamp on when municipalities’ financial information is made publicly available on a centralized repository. As such we focus on municipalities in Illinois. While this increases the internal validity of our research, it potentially limits generalizability across other states. Also, as a reflection of the sample constraint, the number of observations in our study is relatively small. As part of post hoc analyses, we take a closer look at our sample, model and variables used to test our hypothesis.Practical implicationsFor stakeholders, each component of a constrained filing period may provide unique information. For example, the time period between an audit report date and a regulated filing date may send a positive signal about the quality of financial management to investors. For regulators, requiring some sort of centralized public access to municipal financial reports that have transparent time constraints may help states provide stronger governance and help lower municipalities’ borrowing costs.Originality/valueWe use a novel approach (with the Illinois date stamp filing information) to examine our research question. Most prior research has often relied on an assumption that the time between fiscal year-end and the audit report date is the component of time that provides useful information to investors (e.g. Henke and Maher, 2016). In our setting, we explore and find that a component of a constrained filing time period (i.e. the date from an audit filing to a required public accessibility filing) may also provide impactful information to investors.

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Accounting information and municipal bond net interest cost: An empirical evaluation

Cited by 17 publications

References 10 publications

The Relative Influence of Fund-Based and Government-Wide Financial Information on Municipal Bond Borrowing Costs

The Relative Influence of Fund-Based and Government-Wide Financial Information on Municipal Bond Borrowing Costs

On the Value of Municipal Bond Insurance: An Empirical Analysis

Regulated public accessibility to municipalities’ financial reports and bond interest cost

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