Purpose – There is a robust stream of literature on how timeliness, in terms of accessibility to financial information, is important in financial markets. However, concerns surrounding timeliness continue to be raised. In an effort to improve accessibility, some states are requiring municipalities to provide financial reports for posting on an online state-level repository. The objective of this paper is to examine whether this type of regulation is useful.
Design/methodology/approach – Empirical archival research using regression.
Findings – We find support for the idea that municipal bond market participants find value in regulated accessibility to financial reports.
Research limitations – To our knowledge, Illinois is the only state that provides a date stamp on when municipalities’ financial information is made publicly available. While this allows us to examine whether timeliness of accessibility to financial information is associated with bond interest costs, it potentially limits generalizability (across other states).
Practical implications – Timely accessibility may reduce uncertainty in the relevance of reported financial information. This in turn may reduce noise in bond risk premiums, thus creating an incentive for municipalities to provide (and states to require) timely accessibility to reports on state-level repositories.
Originality – Illinois’s unique reporting feature provides methodological strengths to our study. The date-stamp information increases the internal validity of our study by providing a clear measure of when financial reports are accessible. Focusing on one state also limits potential correlated omitted variables.
Keywords - Governmental accounting, municipal bond market, timeliness of financial reporting, regulated public accessibility to reports.
Paper Type - Research
