Consequences of Gaap Disclosure Regulation: Evidence from Municipal Debt Issues

46 Pages Posted: 14 Sep 2005 Last revised: 22 Feb 2012

See all articles by William R. Baber

William R. Baber

Georgetown University - Department of Accounting and Business Law

Angela K. Gore

George Washington University - School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

We compare characteristics of municipal debt issues in states that mandate GAAP for municipalities with issues in states that impose no annual financial disclosure requirements. Cross-sectional comparisons indicate that the use of public (versus private) debt is greater, and municipal debt costs are 14 to 25 basis points lower, in states where GAAP is mandated. Moreover, municipalities in states that impose the GAAP requirement realize lower debt costs following the effective date of the regulation. These results suggest that GAAP requirements reduce municipal borrowing costs. More generally, the evidence indicates that financial reporting regulation reduces contracting costs between borrowers and lenders.

Keywords: Regulation, disclosure, bonds, private debt, local government, public debt

JEL Classification: G12, G38, H79, K22, M41, M44, M48

Suggested Citation

Baber, William R. and Gore, Angela K., Consequences of Gaap Disclosure Regulation: Evidence from Municipal Debt Issues (October 2007). Available at SSRN: https://ssrn.com/abstract=942786 or http://dx.doi.org/10.2139/ssrn.942786

William R. Baber

Georgetown University - Department of Accounting and Business Law ( email )

McDonough School of Business
Washington, DC 20057
United States

Angela K. Gore (Contact Author)

George Washington University - School of Business ( email )

2201 G St NW
Washington, DC 20052
United States
(202) 994-6195 (Phone)

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