Topic: The Freedom of Information Act and Government Financing Costs

Speaker: Zhang Qiru, Santa Clara University, Assistant Professor

Time: April 10, 2024, 10AM

Venue: EMS 206

Abstract: Each U.S. state has implemented an information openness law, commonly known as the Freedom of Information Act (FOIA), granting any person or organization the right to request access to records from any government agency. However, the level of government transparency offered under the FOIA varies across states and over time. We contend that by offering access to government records, FOIA mitigates information asymmetry between municipal bond investors and the municipal government and facilitates the public monitoring of governments, reducing municipal borrowing costs. Using staggered FOIA revisions and a stacked regression design, we find that municipal bond offering yield and offering yield spread decrease (increase) following revisions that strengthen (weaken) state-level FOIA. The FOIA effect on municipal borrowing costs is more pronounced in municipalities with fewer alternative information sources or weaker external monitoring and for riskier bonds. Collectively, the evidence suggests the significant benefits of FOIA in public finance.

Guest Bio: Zhang Qiru, an assistant professor at Santa Clara University in the United States. He earned his Ph.D. from Duke University in the United States. He is a member of the Association of Chartered Certified Accountants (ACCA), a Charterholder of the Chartered Financial Analyst (CFA) from the United States, and a certified professional in sustainability by the Global Reporting Initiative (GRI). He previously worked at PricewaterhouseCoopers. His research interests mainly focus on exploring how accounting information affects the decision-making of investors in U.S. municipal bonds. His doctoral dissertation was published in The Accounting Review.