Accounting Restatements, Governance and Municipal Debt Financing
William R. Baber
Georgetown University - Department of Accounting and Business Law
Angela K. Gore
George Washington University - School of Business
Kevin T. Rich
Marquette University - Department of Accounting
Jean X. Zhang
Virginia Commonwealth University
August 12, 2013
Journal of Accounting & Economics (JAE), 56(2-3) 212-227, 2013.
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 that financial restatements increase the cost of municipal debt financing. Additional analyses 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 supports the use of restatements as a summary measure of financial reporting quality in the municipal context and informs thinking about auditor and voter oversight in the municipal financial reporting process.
Number of Pages in PDF File: 45
Keywords: municipal bonds, governance, restatements, financial reporting quality, debt costs, local government
JEL Classification: G34, M43, M41
Date posted: September 11, 2009 ; Last revised: January 31, 2014