We show that state corruption and political connections have strong effects on municipal bond sales and underwriting. Higher state corruption is associated with greater credit risk and higher bond yields. Corrupt states can eliminate the corruption yield penalty by purchasing credit...

We exploit unique features of the U.S. municipal bond underwriting market to assess how political integrity affects primary financial market outcomes. We show that state corruption and political connections have strong effects on several aspects of municipal bond sales and underwriting....

We show that state corruption and political connections have strong effects on municipal bond sales and underwriting. Higher state corruption is associated with greater credit risk and higher bond yields. Corrupt states can eliminate the corruption yield penalty by purchasing credit...