Author: Rebecca Bloch

Publisher:

Published: 2014

Total Pages: 159

ISBN-13:

The new disclosure requirements brought about by Governmental Accounting Standards Board (GASB) Statement 34 have provided new information for users of government financial reports. The first essay of this dissertation reports the results of a survey of users of government financial reporting, specifically members of the National Federation of Municipal Analysts, asking whether the new information provided by Statement 34 is valuable in their analyses, whether it has improved financial reporting by governments, and for suggestions for improving the information provided. One of the new components of the Statement 34 reporting model is the requirement that municipalities include an MD & A as required supplementary information in their audited financial statements. In the previous essay of this dissertation, a high-level survey asking municipal bond analysts about how they use the Statement 34 information in their analyses, analysts indicated that they find the MD & A more valuable then any other Statement 34 reporting requirement. The second essay explores the determinants of the cross-sectional variation in MD & A disclosure and reports that the size of the municipality is the most important variable in determining the level of municipal MD & A disclosure. The third essay explores the impact of disclosure on contracting. It first reports on the association of MD & A disclosure with default, finding that disclosure is significantly and inversely associated with credit rating, even when accounting for other financial and socio-economic variables. This provides evidence that Statement 34 disclosure quality is incorporated by ratings analysts into their assessment of credit risk. It then further explores the relationship between this disclosure across another segment of the market by evaluating whether disclosure is associated with true interest costs. Results indicate that disclosure may be valued by smaller municipalities and may have been used by investors in the year when one of the largest bond insurers went bankrupt, signifying the virtual end of the market for municipal bond insurance. However, disclosure does not appear to be utilized by investors across the municipal bond market, as results were not significant when looking at the sample as a whole. The fourth essay discusses overall conclusions and avenues for future research.