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The paper examines whether special purpose governments follow the pecking order model when raising capital, replacing firm equity in the original model with local intergovernmental revenues. Special purpose governments are a relatively underexamined component of state and local governments, and their capital structure choices have important implications for America’s aggregate fiscal health. This paper seeks to illuminate special purpose governments’ choices among available forms of capital.

To address our research inquiry regarding whether special-purpose governments adhere to the pecking order theory, we narrow our focus to a specific group of transit entities. Our investigation utilizes data sourced from two distinct repositories: the United States Census of Governments and the National Transit Database. To facilitate integration of these disparate datasets, we establish a correspondence between them using the Federal Information Processing Standard and the transit identification number. Initially, our analysis employs maximum likelihood estimation, comparing these estimates to those generated by a naïve model. Subsequently, we derive parameter estimates through the application of a bivariate probit model.

The paper supports the pecking order hypothesis where internal funds are consumed first, debt is consumed next and IGR is consumed last. The results are robust and are not influenced by simultaneity bias.

The paper uses transit special purpose governments as the special purpose government of interest. These transit special purpose governments have high fixed costs that may inform their capital structure decisions relative to non-transit special purpose governments. Additionally, transit special purpose governments often have a profit-maximizing objective that may not uniformly apply to other special purpose governments, such as school districts, who lack such an incentive.

Our research should grab the attention of state and local politicians, voters, policy experts and scholars. Special-purpose governments, a key part of our governmental system, are on the rise. Understanding them better can guide decision-making on how to allocate resources, set policies and plan strategically. This knowledge boosts financial reporting quality, transparency, accountability and public confidence. Journalists can leverage our findings to ensure accurate and thorough reporting, fostering accountability and trust. Additionally, debt markets and analysts can factor this information into their risk assessments.

The paper enhances our understanding of how special purpose governments interact with existing models of corporate finance when making capital structure decisions.

This paper aims to investigate the extent to which federal acquisitions motivate private-sector partner firms’ investment in innovation.

Archival, Empirical.

This study finds that federal acquisitions are positively associated with contractors’ R&D spending but that the intensity of R&D spending is indistinguishable between firms’ government and private sectors (non-government) contracts. This study also develops a novel measure of the intensity of contractor R&D spending on public sector relative to private-sector clients and assesses construct validity of the measure.

Cultivating innovation is an explicit goal of federal procurement. Innovation is critical to addressing the nation’s collective problems. The results should be of interest to scholars and practitioners, particularly acquisition personnel, one of whose responsibilities is to efficiently steward tax revenues to the most productive (contracting) use.

This study is descriptive in nature and helps to illuminate the extent and conditions under which federal acquisition activity motivates investment in innovation by private-sector partners. These results speak to how effectively government contracting motivates private-sector innovation, which clearly has implications for fiscal stewardship. Additionally, private-sector innovation affects stock price formation. Collectively, these results imply that the extent to which acquisitions motivate innovation has material implications on our country’s fiscal health.