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Accounting restatements, governance and municipal debt financing

Author

Listed:
  • Baber, William R.
  • Gore, Angela K.
  • Rich, Kevin T.
  • Zhang, Jean X.

Abstract

We find that mean municipal debt costs are greater following financial restatement disclosures. Comparisons of the relative use of municipal debt, and of the use of unsecured versus secured debt, corroborate that financial restatements increase the cost of municipal debt financing. Additional analyses indicate that adverse consequences of restatements are mitigated by strong audit oversight and by provisions that encourage direct voter participation in the governance process. The evidence supports the use of restatements as a summary measure of financial reporting quality in the municipal context and informs thinking about auditor and voter oversight in the municipal financial reporting process.

Suggested Citation

  • Baber, William R. & Gore, Angela K. & Rich, Kevin T. & Zhang, Jean X., 2013. "Accounting restatements, governance and municipal debt financing," Journal of Accounting and Economics, Elsevier, vol. 56(2), pages 212-227.
  • Handle: RePEc:eee:jaecon:v:56:y:2013:i:2:p:212-227
    DOI: 10.1016/j.jacceco.2013.08.003
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Steven DeSimone, 2018. "Internal Audit and Financial Reporting Quality in the Public Sector," Working Papers 1802, College of the Holy Cross, Department of Economics.
    2. Ying L. Compton & Angela K. Gore & Susan L. Kulp, 2017. "Compensation design and political risk: the case of city managers," Review of Accounting Studies, Springer, vol. 22(1), pages 109-140, March.
    3. Cuny, Christine, 2016. "Voluntary disclosure incentives: Evidence from the municipal bond market," Journal of Accounting and Economics, Elsevier, vol. 62(1), pages 87-102.
    4. Chen, Yangyang & Murgulov, Zoltan & Rhee, S. Ghon & Veeraraghavan, Madhu, 2016. "Religious beliefs and local government financing, investment, and cash holding decisions," Journal of Empirical Finance, Elsevier, vol. 38(PA), pages 258-271.
    5. repec:eee:jocaae:v:12:y:2016:i:3:p:290-308 is not listed on IDEAS

    More about this item

    Keywords

    Accounting restatements; Municipal governance; Municipal debt;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H83 - Public Economics - - Miscellaneous Issues - - - Public Administration

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