Opportunistic Financial Reporting around Municipal Bond Issues

Beck, Amanda

doi:10.2139/ssrn.2970265

Cited by 9 publications

(24 citation statements)

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“…Second, our paper is relevant to a stream of research that investigates determinants of state and local government governance characteristics (e.g. Zimmerman 1977;Gore 2004;Beck 2017). Our study particularly complements recent papers that focus on the political determinants of governance characteristics.…”

Section: Introductionmentioning

confidence: 83%

Friends in High Places: An Examination of Politically Connected Governments

2018

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Section: Introductionmentioning

confidence: 83%

Friends in High Places: An Examination of Politically Connected Governments

2018

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“…There is evidence that managers manage earnings to report a small surplus in the nonprofit sector (e.g. Leone and Van Horn, 2005;Bouwens et al, 2004;Ballantine et al, 2007;Stalebrink, 2007;Verbruggen and Christiaens 2012;Ferreira et al, 2013;Jegers, 2013;Arcas and Marti, 2016;Greenwood et al, 2017;Beck, 2018;Nguyen and Soobaroyen, 2019).…”

Section: Accrual and Real Activities Manipulation In Nonprofitsmentioning

confidence: 99%

“…Restricting donations give donors direct control over where, when, and how the organisation spends its resources (Loftin, 1998). With the fear that debt holders, being another sophisticated stakeholder group would be suspicious, municipalities' managers do not manipulate earnings upward in the public sector (Beck, 2018).…”

Section: Sophisticated Fundersmentioning

confidence: 99%

“…In fact, there is evidence, albeit much limited compared to for-profit firms, that managers of nonprofits opportunistically misreport the accounting numbers that may influence the level of private donations or government funding (e.g. Bouwens et al, 2004;Leone & Van Horn, 2005;Ballantine et al, 2007;Verbruggen and Christiaens, 2012;Yetman & Yetman, 2012;Balsam and Harris, 2014;Ferreira et al, 2013;Greenwood et al, 2017;Beck, 2018). Research on earnings manipulation in nonprofits is predominantly focused on nonprofit hospitals.…”

Section: Introductionmentioning

confidence: 99%

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A quest for a small surplus: Accrual and real-based earnings management by UK nonprofits

Mahmood¹

2020

Preprint

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In this study, we examine the impact of donor sophistication and low donor-beneficiary separation (service-orientation) on earnings management behaviour in large UK charities. Using a sample of charities that report to the Charity Commission for England and Wales over the period 2007 to 2018, we first show that charities manipulate their bottom-line income using both accrual and real-based manipulation techniques to achieve a target benchmark of a small surplus. Furthermore, we find that the sophistication of funders and larger endowment funds are positively associated with financial reporting quality, moderating the effect of manipulation. We also find that lower donor-beneficiary separation (more service-oriented charity) deters real earnings management behaviour. Instead, where the funders are also the users of a charity's services, i.e. when the donor-beneficiary separation is low, managers are more likely to resort to accruals-based earnings management. Overall, we provide empirical evidence on earnings management in a little-researched sector that need not be beyond reproach, especially in the times of depleting public confidence in the sector.

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“…Within this literature, there are a few studies that examine the use of discretion in setting pension assumptions, as the manipulation of the discount rate assumption is a powerful lever through which costs can be obscured (e.g., Naughton, Petacchi, and Weber, 2015;Novy-Marx, 2013). These papers have generally suggested that fiscal concerns cause these plans to use greater latitude in setting the discount rate so as to mitigate short-term budgetary issues (e.g., Eaton and Nofsinger, 2004;Shnitser, 2014;Naughton, Petacchi, and Weber, 2015;Costello, Petacchi, and Weber, 2017;Beck, 2018) -a finding that is at odds with the longterm nature of public sector promises (Naughton and Spamann, 2015).…”

Section: Introductionmentioning

confidence: 99%

Public-sector pension plans and the discount rate assumption: The role of political incentives

Bagchi

Naughton

2021

Economics Letters

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We provide evidence that political pressure creates incentives for elected officials to choose higher discount rates to value defined benefit pension promises, thus artificially reducing the short-term reported cost of these benefits. We generate our inferences using a unique panel dataset for all local pension plans from the state of Pennsylvania for 2003-2013, and by comparing the differential response to the GASB requirement to lower the discount rate after the Great Recession for plans that are managed by elected officials versus those that are managed by non-elected officials (i.e., municipal authority plans). We find that appointed officials in charge of municipal authority plans decreased their discount rate by 29 basis points more than elected officials in charge of municipal plans. This difference is not attributable to plan factors or financial reporting requirements, and suggests that political pressure leads to optimistic discount rate assumptions.

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Opportunistic Financial Reporting around Municipal Bond Issues

Cited by 9 publications

References 0 publications

Friends in High Places: An Examination of Politically Connected Governments

Friends in High Places: An Examination of Politically Connected Governments

A quest for a small surplus: Accrual and real-based earnings management by UK nonprofits

Public-sector pension plans and the discount rate assumption: The role of political incentives

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