Competition and the Cost of Capital Revisited: Special Authorities and Underwriters in the Market for Tax-emempt Hospital Bonds

Alec Ian Gershberg, Michael Grossman and Fred Goldman

No 7356, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We explore the effects of two kinds of competition on the cost of capital in the tax-exempt bond market: (1) competition amongst underwriters and (2) competition amongst issuers (most of which are quasi-public special authorities sanctioned by state governments). The first kind of competition--essentially, competitive versus negotiated bidding processes--has received considerable attention in the literature. The second kind of competition, the number of potential issuers available to a beneficiary of a bond issue, has received far less attention and is related to the level of decentralization of the market for issuing bonds. Studies of the effects of competition have often used small samples of bond issues--often in one or a few states and for one or a few years--to reach their conclusions. Using a national database covering fourteen years, we find that both kinds of competition lower interest rates, at least in the hospital sector.

JEL-codes: I10 I11 (search for similar items in EconPapers)
Date: 1999-09
New Economics Papers: this item is included in nep-cfn and nep-pub
Note: EH
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Published as A. Gershberg, M. Grossman & F. Goldman "Competition and the Cost of Capital Revisited: Special Authorities and Underwriters in the Market for Tax-exempt Hospital Bonds," National Tax Journal, Vol. 54, No. 2, June 2001: 255-280.

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Journal Article: Competition and the Cost of Capital Revisited: Special Authorities and Underwriters in the Market for Tax-Exempt Hospital Bonds (2001)
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