GASB mandatory disclosure rules and municipal bond yield spreads

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...

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Bibliographic Details
Published inReview of quantitative finance and accounting Vol. 49; no. 2; pp. 379 - 405
Main Authors Nejadmalayeri, Ali, Faircloth, Sheri, Wendel, Jeanne, Chelikani, Surya
Format Journal Article
LanguageEnglish
Published New York Springer US 01.08.2017
Springer Nature B.V
Subjects
Accounting standards
Accounting/Auditing
Bond ratings
Corporate Finance
Disclosure
Econometrics
Economics and Finance
Employment
Finance
GASB statements
Governmental accounting
Maturity
Municipal bonds
Operations Research/Decision Theory
Original Research
Other postemployment benefits
Studies
Taxation
Yield
United States > US
Yields
H74
G10
H75
Mandatory disclosures
Municipal bonds
D82
G18
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Summary: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.
ISSN:0924-865X
1573-7179
DOI:10.1007/s11156-016-0594-9