Effects of the GASB No. 34 infrastructure reporting standards on state highway infrastructure quality

Purpose - The purpose of this paper is to evaluate whether the additional infrastructure information in US state financial statements improves infrastructure quality. Design/methodology/approach - Based on institutional theory, the authors developed six models and estimated them on a state panel data set. Findings - The authors found that the implementation of the Government Accounting Standard Board (GASB) Statement No. 34 improved state highway infrastructure quality, and the states using the modified approach had a larger effect compared to the states using depreciation accounting. The authors further used a two-step path analysis and found that the implementation of GASB 34 indirectly improved highway quality through increasing state highway maintenance expenditures. From the empirical results, the authors conclude that the exercise of collecting and developing systems to track the additional data has provided the opportunity for officials to use the information to prioritize limited funding and improve their asset management practices. Practical implications - Future research may extend this research by exploring the detailed micro-mechanisms of how decision makers use infrastructure information in their asset management practices, as well as by increasing the number of years in the panel data set to fully capture changes in behavior. Social implications - In addition, governments currently using depreciation should be encouraged to move to the modified approach. Originality/value - This is the first attempt to empirically examine the effects of GASB 34 on infrastructure condition.