Market Consequences of Sovereign Accounting Errors

• 成果类型: Article; Early Access
• 署名作者: Boisseau-Sierra, Marion; Chu, Jenny; Rajgopal, Shiva
• 署名单位: University of Cambridge; Columbia University
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2023.00724
• 发表日期: 2024
• 关键词: public sector accounting quality; sovereign financial reporting quality; sovereign accounting errors; Eurostat reservations sovereign bond yields; sovereign credit ratings

摘要

This paper investigates the market consequences of sovereign accounting errors, opening a new area of research on sovereign accounting quality in the accounting literature. Eurostat, a division of the European Commission, provides semiannual assessments of financial reports produced by the member states of the European Union (EU) and issues reservations that detail financial reporting errors. Using a sample of Eurostat reservation issuances across 28 EU countries from 2004 to 2018, we find that sovereign bond yields abnormally increase during a reservation announcement window, especially when a reservation explicitly mentions deficit or debt, when it quantifies the extent of the errors' financial impact, or when the errors relate to recent fiscal data. Consistent with a home bias after the release of negative news, we find that domestic holdings of sovereign debt increase after the issuance of a reservation. Overall, our evidence suggests that sovereign accounting errors have significant market consequences and raises further questions for future research in sovereign accounting quality.