GASB Mandatory Disclosure Rules and Municipal Bond Yield Spreads

The implementation of the Government Accounting Standards Board’s Statement 45 mandates disclosure of other post-employment benefits in a standardized format. The mandate provides an opportunity to analyze non-information impacts of mandatory disclosures, as key components of the information were already publicly available. We find that this mandate is associated with a significant 15 and 73 basis-point increase in yield spreads among tax-exempt and taxable bonds, respectively. This effect is particularly more pronounced for riskier bonds — non-rated and longer maturity taxable bonds. However, states that do not follow the GASB 45 recommendation of prefunding the OPEB obligations face a greater increase in their yield spreads.

Keywords: Mandatory Disclosures, Municipal Bonds, Yields

JEL Classification: D82, G10, G18, H74, H75

Suggested Citation: Suggested Citation

Nejadmalayeri, Ali and Faircloth, Sheri and Wendel, Jeanne and Chelikani, Surya, GASB Mandatory Disclosure Rules and Municipal Bond Yield Spreads (July 7, 2013). Available at SSRN: https://ssrn.com/abstract=2290739 or http://dx.doi.org/10.2139/ssrn.2290739