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Accounting Restatements, Governance and Municipal Debt FinancingWilliam R. BaberGeorgetown University - Department of Accounting and Business Law Angela K. GoreGeorge Washington University - School of Business Kevin T. RichMarquette University - Department of Accounting Jean X. ZhangVirginia Commonwealth University February 5, 2013 AAA 2010 Financial Accounting and Reporting Section (FARS) Paper Abstract: This study investigates the consequences of financial restatements in the market for municipal debt. We find that mean municipal debt costs are greater following financial restatement disclosures. Comparisons of the relative use of municipal debt, and of the use of unsecured versus secured debt, corroborate the primary result that financial restatements increase the cost of municipal debt financing. Additional analyses that consider restatements and governance characteristics interactively indicate that adverse consequences of restatements are mitigated by strong audit oversight and by provisions that encourage direct voter participation in the governance process. The evidence informs thinking about the roles of auditor and voter oversight in the municipal financial reporting process.
Number of Pages in PDF File: 47 Keywords: municipal bonds, governance, restatements, financial reporting quality, debt costs, local government JEL Classification: G34, M43, M41 working papers seriesDate posted: September 11, 2009 ; Last revised: February 9, 2013Suggested CitationContact Information
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