Association for Public Policy Analysis & Management

In 1999, the Governmental Accounting Standards Board (GASB) introduced a new reporting model for state and local governments, significantly altering the format and content of government financial statements. Among other changes, instead of reporting individual funds on a modified accrual basis, governments were required for the first time to report on a government-wide full accrual basis. This paper exploits the staggered phase-in of the standard to examine the impact of the new reporting model on municipal debt issuance. The regression discontinuity analysis represents an improvement on previous analyses of government accounting standards, which have typically relied on selection-on-observables strategies and strong identification assumptions. Governments required to implement the new standard early had less total debt outstanding and were less likely to have issued debt in the previous year.