This study investigates whether municipal bond prices reflect adverse outcomes (i.e., material noncompliance with laws and regulations and questioned costs) and the interactive effect of adverse outcomes and internal control weaknesses. Using hand-collected data from 866 official registration statements, our results suggest that adverse outcomes are an important determinant of initial bond yields and help explain the underlying relationship between weaknesses in internal control and initial bond yields. Specifically, the municipal bond market penalizes governments with adverse outcomes, with a greater penalty if an adverse outcome is accompanied by a material weakness in internal control.

本研究调查市政债券价格是否反映了不利结果（即重大不遵守法律法规和质疑成本）以及不利结果和内部控制缺陷的交互影响。使用从 866 份官方登记声明中手工收集的数据，我们的结果表明，不利结果是初始债券收益率的重要决定因素，并有助于解释内部控制缺陷与初始债券收益率之间的潜在关系。具体而言，市政债券市场会对产生不利结果的政府进行惩罚，如果不利结果伴随着内部控制的重大缺陷，则会受到更大的惩罚。