Opportunistic financial reporting around municipal bond issues

• 成果类型: Article
• 署名作者: Beck, Amanda W.
• 署名单位: University System of Georgia; Georgia State University
• 刊物名称: REVIEW OF ACCOUNTING STUDIES
• ISSN/ISSBN: 1380-6653
• DOI: 10.1007/s11142-018-9454-2
• 发表日期: 2018
• 页码: 785-826
• 关键词: earnings management; Accounting information; local-governments; Credit ratings; performance adjustment; market measures; DEBT ISSUES; no. 34; QUALITY; disclosure

摘要

Understanding how government officials exercise discretion over financial reporting is essential for citizens, regulators, and researchers to interpret and monitor financial performance. I examine two measures of discretion in governmental financial statements: abnormal accruals in full accrual financial statements, and other financing sources and uses in modified accrual financial statements. Using a unique dataset of hand-collected financial data from California, I document empirically that municipal governments pursue a break-even income in both sets of financial statements, and that they focus particularly on avoiding deficits. Further, I find evidence that municipalities employ discretionary accruals but not other financing sources and uses to a greater extent before issuing bonds. Prior to bond issuance, officials facing deficits use less discretion. The results highlight the multidimensional and sometimes conflicting incentives government officials face, and the reporting strategies they use as they weigh the expected costs and benefits of using accounting gimmicks to report favorable bottom lines.