Muni Disclosure

Abstract

This paper examines which municipal disclosures provide informational value to investors. Using the entire universe of post-issuance financial and event disclosures from 2009 to 2022, we find that most municipal bonds do not trade in the week of -- or the week after -- a disclosure filing. However, some disclosures do provide enough new information to heighten trading. Investors trade more on credit-relevant disclosures (such as construction progress updates and adverse credit event disclosures) and less on required annual financial statements. Trading after disclosure filings also increases more when a bond is large or risky. Our results collectively suggest that municipal disclosures only have informational value for some disclosure types and some issuers. In further analyses, we find that illiquidity, trading before the disclosure, and stale information contribute to the limited trading on the average disclosure. The findings suggest that reconsidering a one-size-fits-all approach to regulating municipal disclosures may be worthwhile.

Keywords: Information Content, Municipal Disclosure, Municipal Bonds

JEL Classification: G12, G14, G18, H7