GASB 34's Information Relevance: Evidence from New Issue Local Government Debt

37 Pages Posted: 15 Apr 2010

See all articles by Justin Marlowe

Justin Marlowe

University of Chicago, Harris School of Public Policy, Center for Municipal Finance

Date Written: April 14, 2010

Abstract

I examine the relevance to credit analysts and investors of information presented in the government-wide financial reports of municipalities. Government-wide, accrual-basis measures such as those required by GASB Statement 34 are potentially useful for assessing local government credit quality and pricing local government bonds because most local governments have capital-intensive infrastructure assets. I examine information relevance in the context of municipal bond credit analysis, primary market pricing, and secondary market pricing of new issue municipal bonds. I find that government-wide financial information does have incremental value relative to traditional fund-based measures. However, I also find that fund-based measures are far more relevant for assessing default risk and for pricing new issue municipal bonds. The clearest evidence of information relevance of the government-wide information for pricing efficiency in the secondary market. These results have implications for our understanding of the implications of accrual-basis accounting in US governments.

Keywords: Governmental Accounting, Capital Markets, Debt Management, GASB 34

JEL Classification: G12, H74, M40

Suggested Citation

Marlowe, Justin, GASB 34's Information Relevance: Evidence from New Issue Local Government Debt (April 14, 2010). Available at SSRN: https://ssrn.com/abstract=1589343 or http://dx.doi.org/10.2139/ssrn.1589343

Justin Marlowe (Contact Author)

University of Chicago, Harris School of Public Policy, Center for Municipal Finance ( email )

1155 East 60th Street
Chicago, IL 60637
United States

HOME PAGE: http://https://harris.uchicago.edu/directory/justin-marlowe

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
630
Abstract Views
2,980
Rank
77,900
PlumX Metrics