Fool the markets? Creative accounting, fiscal transparency and sovereign risk premia

Please use this identifier to cite or link to this item: http://dspace.mediu.edu.my:8181/xmlui/handle/10419/19647

Title:	Fool the markets? Creative accounting, fiscal transparency and sovereign risk premia
Keywords:	F34 H6 G12 E43 E62 ddc:330 Risk premia government bond yields creative accounting stock-flow adjustments gimmickry transparency Haushaltsdefizit Öffentliche Schulden Bilanzpolitik Konvergenzkriterien EU-Stabilitätspakt Zinsdifferenz Länderrisiko Risikoprämie Öffentliche Anleihe Schätzung EU-Staaten
Issue Date:	16-Oct-2013
Description:	We investigate the effects of official fiscal data and creative accounting signals on interest rate spreads between bond yields in the European Union. Our model predicts that risk premia contained in government bond spreads should increase in both, the official fiscal position and the expected "creative" part of fiscal policy. The relative importance of these two signals depends on the transparency of the country. Greater transparency reduces risk premia. The empirical results confirm the hypotheses. Creative accounting increases the spread. The increase of the risk premium is stronger if financial markets are unsure about the true extent of creative accounting. Fiscal transparency reduces risk premia. Instrumental variable regressions confirm these results by addressing potential reverse causality problems and measurement bias.
URI:	http://koha.mediu.edu.my:8181/xmlui/handle/10419/19647
Other Identifiers:	http://hdl.handle.net/10419/19647 ppn:514273933 RePEc:zbw:bubdp1:4470
Appears in Collections:	EconStor

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