The Relative Influence of Fund-Based and Government-Wide Financial Information on Municipal Bond Borrowing Costs

Abstract

ABSTRACT Our study provides evidence of the association between accrual-based financial information provided by the GASB Statement No. 34 reporting model and new issue municipal bond borrowing costs. Given the controversy that surrounded the implementation of the GASB Statement No. 34 reporting model, questions that continue to be raised about the usefulness of the model, and recent calls for research on Statement No. 34 by the GASB, our study into the informativeness of the GASB Statement No. 34 model is timely and helpful in informing the GASB decision process. The findings of our study indicate that the Statement No. 34 model provides incremental information to the new issue market beyond that provided by the pre-Statement No. 34 model. Our results indicate that the Statement No. 34 model may allow creditors to better assess issuers' longer-term performance.