The Housing Value-Relevance of Governmental Accounting Information

Posted: 25 Jul 2014

See all articles by Jerry W. Lin

Jerry W. Lin

affiliation not provided to SSRN

K. K. Raman

The University of Texas at San Antonio

Date Written: Summer 1998

Abstract

In this paper, we examine the value-relevance of local government accounting measures of financial condition from the perspective of the citizenry. The Governmental Accounting Standards Board (GASB) has identified citizens as a primary user group for governmental accounting information, albeit from an electoral perspective. However, citizens can express their preferences not only through voting (voice) but also through mobility (exit) (Hirschman, 1970, p. 4). In metropolitan areas, citizens typically have a choice of residential location among a number of different local governments. Since homeowner equity represents a substantial portion of all personal wealth, housing values are of significant interest to citizens. We identify local government financial condition as a relevant locational attribute in valuing housing. Although individual citizens generally do not read government financial reports, others (such as members of professional groups) may serve as information search agents for and on behalf of the citizenry (GASB, 1997, para. 165). We investigate whether extant local government accounting data (as measures of financial condition) are priced in metropolitan housing markets and whether the association between accounting information and housing values is stronger for local governments with a relatively higher property tax burden. The policy implications of our study are also addressed.

Keywords: governmental accounting, financial condition, valuing housing

JEL Classification: M41, M42, M48

Suggested Citation

Lin, Jerry W. and Raman, K. K., The Housing Value-Relevance of Governmental Accounting Information (Summer 1998). Journal of Accounting and Public Policy, Vol. 17, No. 2, 1998. Available at SSRN: https://ssrn.com/abstract=2470619

Jerry W. Lin

affiliation not provided to SSRN

K. K. Raman (Contact Author)

The University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-8749 (Phone)

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