Governmental Capital Markets Research in Accounting: A Review, Extension, and Directions for Future Research

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

“…Both practitioners (e.g., Van Horne 1990) and researchers (e.g., Ederington, Yawitz, and Roberts 1987;Khurana and Raman 2003) indicate that financial accounting information is important incrementally, since bond rating information is not fully informative of the financial performance or default risk of entities. The finding that bond ratings are not fully informative to the corporate bond market is reinforced by research in the municipal bond market (Liu and Seyyed 1991;Ingram and Wilson 1999;Reck, Wilson, Gotlob, and Lawrence 2004).…”

“…Although very little research exists on the impact of accrual information in assessing municipal default risk, prior research (see reviews by Ingram, Raman, and Wilson [1987] and Reck et al [2004]) finds that information provided on the modified accrual basis is useful to municipal creditors for assessing default risk. Of interest, then, is whether the addition of accrual financial information concerning the longer-term effects of management decisions is associated with default risk assessment.…”

“…The reason for this focus is that the general fund is the primary operating fund of government, and depends heavily on nonexchange tax revenues for its operation. Due to its size and the source of its resources, the operating performance of the general fund has been found by previous researchers (Ingram et al 1987;Wilson 1990;Reck et al 2004) to be useful for assessing the default risk on general obligation bonds. Consequently, we test whether the additional information required by GASB Statement No.…”

Sustainable Public Pension System for Florida Local Governments: Financial Solvency, Paradigm Switch, and Interperiod Equity

“…The frequently used empirical gauges of fiscal stress are the current year general fund surplus (or deficit) and the year-end general fund balance (Reck, Wilson, Gotlob, & Lawrence, 2001;Wilson, 1983;Wilson & Howard, 1984 …”

“…Based on the literature review, the governments that are under higher fiscal pressure tend to fund their pension plans at lower levels, which would worsen the financial status of public pension systems (Chaney, Copley, & Stone, 2002;Coggburn & Kearney, 2010;Eaton & Nofsinger, 2004;McCue, 1994). Followed the previous practices (Reck, Wilson, Gotlob, & Lawrence, 2001;Wilson, 1983;Wilson & Howard, 1984), the indicator selected in this study for the fiscal stress is the excess/deficiency of revenue over/under expenditure (total account at city level year end) per 1,000 populations. The gauge is standardized by population in order to control the impact of city size differences.…”