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Limits of Disclosure Regulation in the Municipal Bond Market

Author

Listed:
  • Ivan T. Ivanov

    (Federal Reserve Board)

  • Tom Zimmermann

    (University of Cologne)

  • Nathan Heinrich

    (Federal Reserve Board)

Abstract

We examine recent regulation requiring US municipal governments to disclose private debt. We show that governments fail to disclose 55-80% of reportable debt events and that, conditional on disclosure, filings often omit contract details essential for bond pricing. Non-compliant issuers are also riskier than compliers, with disclosure decreasing in the potential of private debt to adversely affect bondholders. Event studies suggest that disclosure reveals positive news and is especially informative to investors in low-rated bonds or during market turmoil episodes. Overall, private debt disclosure remains largely voluntary, highlighting challenges to recent federal initiatives to increase transparency for municipal bond investors.

Suggested Citation

  • Ivan T. Ivanov & Tom Zimmermann & Nathan Heinrich, 2022. "Limits of Disclosure Regulation in the Municipal Bond Market," ECONtribute Discussion Papers Series 186, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:186
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    1. Ivan T. & Tom Zimmermann, 2021. "The "Privatization" of Municipal Debt," ECONtribute Discussion Papers Series 062, University of Bonn and University of Cologne, Germany.

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    Keywords

    Bond pricing; disclosure regulation; private debt;
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