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Publication

Economic Consequences of Public Pension Accounting Rule Changes: Evidence from Housing Markets and Local Economies

Forthcoming, The Accounting Review, 2025

Single-authored Paper

Abstract: This paper provides novel evidence that public pension accounting rule changes have real economic consequences on local housing markets and the surrounding economies. After the introduction of pension accounting rules GASB 67 and 68, pension liabilities have to be disclosed on governments’ balance sheets, and lower investment returns should be used to calculate the present values of pension liabilities, which significantly increase the salience and magnitude of governments’ pension underfunding problems. By applying a contiguous county approach, I find that after the GASB rule changes, the housing prices in counties from states with larger pension liabilities as a percentage of total GDP grow more slowly relative to their adjacent counties. Every 10 percent increase in the level of pension underfunding leads to a 0.2 to 0.3% decrease in the annual growth rate, which translates to a 10 to 15% relative decline from a normal growth rate of 2%. I also find that the negative relation between housing price growth and pension underfunding is stronger for states that are expected to be impacted more by the rules. Other local economic variables, including new building permits, business establishments and public employment outcomes are also negatively impacted by the revelation of pension underfunding. This paper sheds light on the channels through which the US pension crisis influences the real economy, and how accounting treatments amplify this effect. 

Working Papers

From Regulators to the Public: Does Regulatory Disclosure Enhance Environmental Justice Outcomes?

With Trung Nguyen and Xi Wu

Abstract: We study the effect of regulatory disclosure following the sequential internal and public launches of an environmental justice (EJ) mapping tool, focusing on the complementarity of regulatory and public scrutiny in improving EJ related outcomes. From 2010 to 2015, the Environmental Protection Agency (EPA) developed and launched EJScreen, an online tool that aggregates dispersed location-specific demographic and environmental data, and visualizes this information in conspicuous color-schemed mapping tools for identifying locations where vulnerable communities disproportionately bear the brunt of pollution, or areas with high EJ concerns. Using a difference-in-differences approach, we find an increase in regulatory monitoring and public scrutiny targeting areas with high EJ concerns around the internal and public launches of EJScreen, respectively. Moreover, there is a reduction in regulated toxic chemical releases in high EJ concern areas following the internal use of EJScreen, while a reduction in unregulated greenhouse gas (GHG) emissions only after the tool became publicly available. The reduction in GHG is greater in areas with larger public and media attention. We substantiate our results using a stacked difference-in-differences approach and a regression discontinuity design based on a similar tool in California and find consistent results. The findings provide policy implications for regulatory disclosure to enhance the complementarity of regulators and the public in achieving policy outcomes.

Unveiling Transparency: Determinants and Consequences of Disclosure Commitments in the Municipal Bond Market

Single-authored Paper

Presented in 35th EAA Doctoral Colloquium, 2019; INSEAD Thesis 180 Competition, 2019; INSEAD-Wharton Doctoral Consortium, 2018

Abstract: This paper presents novel empirical evidence on the contents and effects of continuing disclosure commitments in the economically important municipal bond market. Unlike their corporate counterparts, municipal bond issuers are exempted from most disclosure regulations. Instead, they are required to enter into a continuing disclosure agreement (CDA), outlining the characteristics of the disclosures they commit to provide post-issuance. I manually extract the content of the CDAs and construct an index (C-index) to measure different levels of disclosure commitments by the issuers. I find that issuers commit to providing better disclosure when the benefits of transparency are larger. In the primary market, higher C-indexes are associated with lower costs of borrowing and less underpricing. The effects are stronger when investors’ demand for information is higher and when the commitments are perceived as more credible. In the secondary market, higher C-indexes are associated with better ex-post disclosures and liquidity, while the failures to meet the commitments lead to lower liquidity. Overall, the evidence suggests that investors view the CDAs as a useful signal of issuers' future transparency.

Evaluating Price Informativeness and Its Determinants 

With Peter Joos, Steven Monahan, and Sujesh Nambiar

Presented by coauthors in 2019 AAA, Tel Aviv, University of Southern California, Virginia Tech;

Abstract: We develop a price informativeness measure that reflects the accuracy of investors’ forecasts of earnings embedded in current price. We then empirically evaluate economy- and firm-level price informativeness. Investors’ forecasts of economy-level earnings are more optimistic (pessimistic) when sentiment is positive (negative). Their forecasts are also more biased and more imprecise when sentiment is extreme, and especially when it is negative and extreme. Firm-level prices are less informative when: (i) uncertainty is high; (ii) analyst following is low; (iii) the firm provides highly aggregated accounting data; and, (iv) a large fraction of the firm’s shares is held by retail investors.