GASB mandatory disclosure rules and municipal bond yield spreads

Ali Nejadmalayeri (), Sheri Faircloth (), Jeanne Wendel and Surya Chelikani ()
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Sheri Faircloth: University of Nevada-Reno
Surya Chelikani: Quinnipiac University

Review of Quantitative Finance and Accounting, 2017, vol. 49, issue 2, No 4, 379-405

Abstract: 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.

Keywords: Mandatory disclosures; Municipal bonds; Yields (search for similar items in EconPapers)
JEL-codes: D82 G10 G18 H74 H75 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s11156-016-0594-9

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