45 Pages Posted: 11 Sep 2009 Last revised: 31 Jan 2014
Date Written: August 12, 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.
Keywords: municipal bonds, governance, restatements, financial reporting quality, debt costs, local government
JEL Classification: G34, M43, M41
Suggested Citation: Suggested Citation
Baber, William R. and Gore, Angela K. and Rich, Kevin T. and Zhang, Jean X., Accounting Restatements, Governance and Municipal Debt Financing (August 12, 2013). Journal of Accounting & Economics (JAE), 56(2-3) 212-227, 2013.. Available at SSRN: https://ssrn.com/abstract=1471056 or http://dx.doi.org/10.2139/ssrn.1471056