The Economic Consequences of GASB Financial Statement Disclosure

63 Pages Posted: 9 Mar 2020 Last revised: 10 Feb 2021

See all articles by Michael Dambra

Michael Dambra

SUNY at Buffalo - School of Management

Omri Even-Tov

Haas School of Business - UC Berkeley

James P. Naughton

University of Virginia, Darden School of Business

Date Written: February 9, 2020

Abstract

We examine whether Governmental Accounting Standards Board (GASB) financial statement disclosure influences local governments’ economic decision-making. To do so, we exploit a recent GASB standard that differentially changed the disclosure requirements for pension obligations for county governments. The standard, GASB 68, had no effect on pension economics nor on the annual budget—it only affected whether and how information was presented on GASB financial statements and did so differently depending on the type of pension plan sponsored by the county. Using a broad hand-collected dataset, we document that newly disclosing counties reduced public welfare expenditures, employment, and salary expenses relative to those that had disclosed such information prior to GASB 68. We conduct extensive field research and employ several cross-sectional analyses to conclude that the effects we document are likely driven by increased awareness of the financial costs of pension obligations by newly disclosing counties. More specifically, we find that GASB 68 changed these counties’ perspective of their pension arrangement from a bill (i.e., the county only has to make an annual pension contribution) to a liability (i.e., the county is ultimately responsible for funding the pension deficit), and that this new perspective generated the documented fiscal response.

Keywords: GASB, Disclosure, Real effects, Public pension

JEL Classification: M41, M48, H7

Suggested Citation

Dambra, Michael and Even-Tov, Omri and Naughton, James P., The Economic Consequences of GASB Financial Statement Disclosure (February 9, 2020). Available at SSRN: https://ssrn.com/abstract=3538354 or http://dx.doi.org/10.2139/ssrn.3538354

Michael Dambra (Contact Author)

SUNY at Buffalo - School of Management ( email )

354 Jacobs Management Center
Buffalo, NY 14260-1660
United States
716-645-3237 (Phone)

Omri Even-Tov

Haas School of Business - UC Berkeley ( email )

Haas School of Business
Berkeley, CA 94720
United States
3104302236 (Phone)

James P. Naughton

University of Virginia, Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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