The Cost Burden of Negotiate d Sales Restrictions: A Natural Experiment Using Heterogeneous State Laws (joint with Richard C. Green, Burton Hollifield and N orman Schürhoff)
Abstract:
Should legislati on ban book building for municipal bonds? What are the costs of requiring p ublic auctions? We compare the offering yields of local governments that ar e forced by state law to use public auctions to the offering yields of unco nstrained local governments. In a sample of 143,464 school bonds issued bet ween 2004 and 2014 in the US, we find that the constraint has a negative co st. On average, offering yields are twelve percent lower for constrained is suers. This result suggests that unconstrained issuers do not choose betwee n book building and public auctions based on expected borrowing costs. We a lso find that most unconstrained issuers prefer book building. The existing theories that explain the popularity of book building in IPOs cannot expla in its popularity in the municipal bond market either. These results sugges t that there are other relevant and undiscovered factors behind the popular ity of book building.
DTSTAMP:20260405T223058Z DTSTART:20181129T043000Z DTEND:20181129T180000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR