"Information Asymmetry and Municipal Revenue Bonds".

• Author: Douglas, Jennifer Ritter

Kurtenbach, James M. and Vijayakumar, Jayaraman

Journal of Public Budgeting, Accounting & Financial Management, Summer 1999, pp. 177-202.

This article measures information asymmetry is the market for municipal revenue bonds. It examines the relationship between bond ratings, sinking funds, quality-differentiated audits, and measures of bond interest cost. The authors find that investors associate sinking fund provisions in municipal revenue bonds with riskier projects or riskier issuers, either of which results in increased borrowing costs for issuers. They also found that Big Six auditors are significantly associated with higher interest costs, but are not associated with the use of sinking...