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

26 Pages Posted: 8 Aug 2012

See all articles by Alec Ian Gershberg

Alec Ian Gershberg

The New School - Robert J. Milano Graduate School of Management & Urban Policy ; National Bureau of Economic Research (NBER)

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Fred Goldman

The New School; National Bureau of Economic Research (NBER)

Date Written: September 1999

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.

Suggested Citation

Gershberg, Alec Ian and Grossman, Michael and Goldman, Fred, Competition and the Cost of Capital Revisited: Special Authorities and Underwriters in the Market for Tax-Emempt Hospital Bonds (September 1999). NBER Working Paper No. w7356. Available at SSRN: https://ssrn.com/abstract=190370

Alec Ian Gershberg (Contact Author)

The New School - Robert J. Milano Graduate School of Management & Urban Policy ( email )

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National Bureau of Economic Research (NBER) ( email )

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Michael Grossman

National Bureau of Economic Research (NBER), NY Office ( email )

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CUNY The Graduate Center - Department of Economics ( email )

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HOME PAGE: http://mgrossman.ws.gc.cuny.edu

Fred Goldman

The New School ( email )

66 Fifth Avenue
New York, NY 10011
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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