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https://ssrn.com/abstract=1885301
 
 

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The Politics of Government Financial Management: Evidence from State Bonds


Craig Brown


National University of Singapore (NUS) - Department of Finance

October 7, 2016

Paolo Baffi Centre Research Paper No. 2011-102

Abstract:     
In the $3.7 trillion U.S. state-and-local-government-bond market, greater issuance costs (lower issue-prices and greater underwriting fees) benefit financial institutions, while costing taxpayers. Campaign contributions by politically supportive underwriters can be associated with lower issuance costs. Alternatively, contributions can influence a politician to accept greater costs. This paper’s evidence suggests that contributions influence politicians: In the absence of an underwriter auction, underpricing increases with the chosen underwriter’s contributions relative to others. Moreover, the difference in the fees charged by contributing underwriters and those charged by non-contributing underwriters is 2.9%. In the presence of an underwriter auction, these results are statistically insignificant.

Number of Pages in PDF File: 64

Keywords: Government Financial Management, Security Issuance, Underpricing, Campaign Contributions.

JEL Classification: H74, P16, G24


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Date posted: July 16, 2011 ; Last revised: January 13, 2017

Suggested Citation

Brown, Craig, The Politics of Government Financial Management: Evidence from State Bonds (October 7, 2016). Paolo Baffi Centre Research Paper No. 2011-102. Available at SSRN: https://ssrn.com/abstract=1885301 or http://dx.doi.org/10.2139/ssrn.1885301

Contact Information

Craig O. Brown (Contact Author)
National University of Singapore (NUS) - Department of Finance ( email )
Mochtar Riady Building
15 Kent Ridge Drive
Singapore, 119245
Singapore
+65 6516-6815 (Phone)
+65 6779-2083 (Fax)
HOME PAGE: http://bschool.nus.edu.sg/staffprofile/bizcb
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