Abstract
The purpose of this study is to examine the time-dependent relationship between the financial conditions and bond ratings of local governments, and to construct hypotheses about the process. To achieve this purpose, this study investigates time-series behavior of the relationship between financial indicators calculated from Comprehensive Annual Financial Reports (CAFRs) published under GASB Statement No.34 and state bond ratings (hereafter, CAFR-BR relationship). Results of empirical analysis show that CAFR-BR relationship appears gradually, not immediately, after the implementation of GASB Statement No.34. The gradual appearance suggests that the CAFR-BR relationship is caused by the gradually increasing factors, such as the variance of the financial conditions of U.S. states.
