When Knowledge Is Power: Evidence from the Municipal Bond Market

Journal of Accounting and Economics, Forthcoming

49 Pages Posted: 5 May 2016 Last revised: 5 Aug 2017

See all articles by Christine Cuny

Christine Cuny

New York University (NYU) - Leonard N. Stern School of Business

Date Written: August 4, 2017

Abstract

I investigate whether access to fundamental information enhances retail investors’ bargaining power, reducing the premium that small municipal bond investors pay over large investors. I find a reduction in this small trade premium after the introduction of an online disclosure repository that lowers retail investors’ information acquisition costs. This finding is limited to issuers whose disclosures are disseminated through the repository. The finding is pronounced for issuers that impose high information acquisition costs on investors ex-ante and those that exhibit high disclosure quality ex-post. These results suggest that as investors’ information sets align, so does their bargaining power with dealers.

Keywords: Dealer Markets; Municipal Debt; Information Asymmetry; Asymmetric Bargaining Power; Dissemination

JEL Classification: D82; D83; D43

Suggested Citation

Cuny, Christine, When Knowledge Is Power: Evidence from the Municipal Bond Market (August 4, 2017). Journal of Accounting and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2773890 or http://dx.doi.org/10.2139/ssrn.2773890

Christine Cuny (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Ste. 10-91
New York, NY NY 10012
United States
212-998-0423 (Phone)

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