Abstract
IMPACT This article explains some aspects of the role of accrual-based information disclosed by local governments, which has been a subject of debate for some time. Using eXplainable AI (XAI), the authors demonstrate that accrual-based information is reflected in local government bond prices in Japan. The article has important findings for practitioners. The first is the pricing process for municipal bonds. This is useful for practices in municipal bond issuance and investment for financial instruments. The second is the applicability of machine learning in bond markets. The findings will also be useful to data scientists and public officers in local governments looking to create value through the use of machine learning (particularly XAI).
Published Version
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