Impact of Corporate Subsidies on Borrowing Costs of Local Governments: Evidence from Municipal Bonds*

Sudheer Chava, Baridhi Malakar () and Manpreet Singh

Review of Finance, 2024, vol. 28, issue 1, 117-161

Abstract: We analyze the impact of $40 billion of corporate subsidies given by US local governments on their borrowing costs. We find that winning counties experience a 15.2 basis points (bps) increase in bond yield spread as compared to the losing counties. The increase in yields is higher (18–26 bps) when the subsidy deal is associated with a lower jobs multiplier or when the winning county has a lower debt capacity. However, a high jobs multiplier does not seem to alleviate the debt capacity constraints of local governments. Our results highlight the potential costs of corporate subsidies for local governments.

Keywords: Corporate subsidies; Municipal debt (search for similar items in EconPapers)
JEL-codes: G12 H25 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rfad021 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:revfin:v:28:y:2024:i:1:p:117-161.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().