Relationship between Municipal Bond Spreads and Incremental Information of Public Financial Statements based on the "Unified Standard Model" in Japan

Abstract

　We investigate the relationship between the incremental information in the public accounting financial statements based on the uniform accounting standards introduced to local governments in Japan and the municipal bond spread. Our results show that incremental information on liabilities（e.g., reserves for retirement benefits） has a significant relationship with municipal bond interest rates, suggesting the possibility of the decision-making usefulness of public accounting financial statements for the municipal bond market. This study contributes to clarifying the significance of the introduction of full-accrual accounting standards to local governments.