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GASB mandatory disclosure rules and municipal bond yield spreads

Author

Listed:
  • Ali Nejadmalayeri

    (Oklahoma State University)

  • Sheri Faircloth

    (University of Nevada-Reno)

  • Jeanne Wendel

    (University of Nevada-Reno)

  • Surya Chelikani

    (Quinnipiac University)

Abstract

The implementation of the Government Accounting Standards Board’s Statement 45 mandates disclosure of “other post-employment benefits” (OPEB) in a standardized format. The mandate provides an opportunity to analyze noninformation impacts of mandatory disclosures, as key components of the information were already publicly available. We find that this mandate is associated with a significant 15 and 73 basis-point increase in yield spreads among tax-exempt and taxable bonds, respectively. This effect is particularly pronounced for riskier bonds—nonrated and longer maturity taxable bonds. However, states that do not follow the GASB 45 recommendation of prefunding the OPEB obligations face a greater increase in their yield spreads.

Suggested Citation

  • Ali Nejadmalayeri & Sheri Faircloth & Jeanne Wendel & Surya Chelikani, 2017. "GASB mandatory disclosure rules and municipal bond yield spreads," Review of Quantitative Finance and Accounting, Springer, vol. 49(2), pages 379-405, August.
    • Handle: RePEc:kap:rqfnac:v:49:y:2017:i:2:d:10.1007_s11156-016-0594-9
    DOI: 10.1007/s11156-016-0594-9
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    More about this item

    Keywords

    Mandatory disclosures; Municipal bonds; Yields;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare

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