The Effect of New Issue Accounting Information on Seasoned Municipal Bond Prices

Posted: 10 Feb 1997

See all articles by Earl R. Wilson

Earl R. Wilson

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

David Gotlob

Indiana University; Purdue University at Fort Wayne

Carol M. Lawrence

University of Richmond - E. Claiborne Robins School of Business - Economics

Date Written: May 1996

Abstract

Prior studies have shown that seasoned municipal bond prices exhibit a marked increase in variability during the period of new bond issues by the same municipality. Those studies did not attempt, however, to determine whether accounting information was part of the total information being assimilated into the seasoned bond prices. This issue is of substantial policy interest given the SEC's recent rule barring dealers from underwriting new issues unless the issuer agrees to provide continuing disclosure to investors. The SEC acted following growing concern about poor disclosure in the municipal bond secondary market. This study provides evidence that accounting measures believed to be important to bond investors are significantly associated with returns on the seasoned bonds of infrequent issuers during a new issue but not during two control nonevent periods. No associations were found for frequent issuers.

JEL Classification: M41, G12

Suggested Citation

Wilson, Earl R. and Gotlob, David and Lawrence, Carol M., The Effect of New Issue Accounting Information on Seasoned Municipal Bond Prices (May 1996). Available at SSRN: https://ssrn.com/abstract=2875

Earl R. Wilson (Contact Author)

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

School of Accountancy
Columbia, MO 65211
United States
573-882-3225 (Phone)
573-882-2437 (Fax)

David Gotlob

Indiana University

1309 E. 10th St.
Bloomington, IN 47405
United States

Purdue University at Fort Wayne

2101 E Coliseum Boulevard East
Fort Wayne, IN 46805-1499
United States

Carol M. Lawrence

University of Richmond - E. Claiborne Robins School of Business - Economics ( email )

Richmond, VA 23173
United States

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