Build America Bonds (BABs) are a new form of municipal financing introduced in 2009. Investors in BAB municipal bonds receive interest payments that are taxable, but issuers receive a subsidy from the U.S. Treasury. The BAB program has succeeded in lowering the cost of funding for state and...

Using a system of equations approach, this paper empirically tests the impact of credit quality, asset maturity, and other issuer and issue characteristics on the maturity of municipal bonds. We find that under conditions of lower information asymmetry that prevails in the municipal sector,...

Local governments often seek credit ratings from multiple agencies for external financing. Rating shopping and catering, the incentives of the rating agencies, and the career incentives of the analysts issuing the ratings may render the ratings interdependent. This paper estimates the feedback...

Using data from the California primary market, we find that on average Build America Bonds (BABs) have after-subsidy interest rates of approximately 72 basis points lower than tax-exempt bonds, and the saving increases with bond maturity. The implied tax rate for the marginal municipal bond...

How responsive is the supply of tax-exempt bonds to state and local government borrowing costs? This question is critical to the effectiveness of current federal tax policies designed to stimulate investment in infrastructure and education. Would states borrow more if their cost of capital were...

We investigate how political uncertainty around U.S. gubernatorial elections affects local government borrowing costs. Municipal bond yields sharply increase by 7 basis points before an election and reverse afterward. This political risk premium is higher during economic downturns and close...

We investigate whether credit rating agencies (CRAs) and investors price the extent to which municipal bond ratings are explainable using public information. We use an ordinal logistic regression to estimate the expected and unexpected portions of bond ratings, and find that both CRA fees and...

A regulation following from Dodd-Frank prohibits municipal financial advisors from simultaneously acting as municipal bond underwriters. Using a difference-in-differences approach, I test whether this reduction in advisor privileges affects financial advice and bond outcomes. Bonds with...

Municipal bonds are often "advance refunded." Bonds that are not yet callable are defeasedby creating a trust that pays the interest up to the call date, and pays the call price. Newdebt, generally at lower interest rates, is issued to fund the trust. Issuing new securitiesto fund payments on...

The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory...