FOOL THE MARKETS? CREATIVE ACCOUNTING, FISCAL TRANSPARENCY AND SOVEREIGN RISK PREMIA

Kerstin Bernoth () and Guntram Wolff

ULB Institutional Repository from ULB -- Universite Libre de Bruxelles

Abstract: ABSTRACT We investigate the effects of official fiscal data and creative accounting signals on interest rate spreads between bond yields in the European Union. We find that two different measures of creative accounting indeed both increase the spread. The increase of the risk premium is stronger, if financial markets are unsure about the true extent of creative accounting. Moreover, fiscal transparency reduces risk premia. Instrumental variable regressions confirm these results by addressing potential reverse causality problems and measurement bias.

Date: 2008-09
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Published in: Scottish journal of political economy (2008) v.55 n° 4,p.465-487

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Related works:
Journal Article: FOOL THE MARKETS? CREATIVE ACCOUNTING, FISCAL TRANSPARENCY AND SOVEREIGN RISK PREMIA (2008)
Working Paper: Fool the Markets? Creative Accounting, Fiscal Transparency and Sovereign Risk Premia (2006)
Working Paper: Fool the markets? Creative accounting, fiscal transparency and sovereign risk premia (2006)
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