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

Posted: 10 Sep 2001 Last revised: 24 Jul 2008

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)

Abstract

We explore the effects of two kinds of competition on the cost of capital in the tax-exempt bond market: (1) competition among underwriters and (2) competition among issuers (mostly quasi-government special authorities). The first kind of competition - competitive versus negotiated bidding processes - has received considerable previous attention. The second kind of competition has received far less attention and is related to the level of decentralization of the market for issuing bonds. Using a national database covering 14 years, we find that both kinds of competition lower interest rates, at least in the hospital sector.

JEL Classification: I10, I11, I18, H74

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-Exempt Hospital Bonds. National Tax Journal, Vol. 54, No. 3, pp. 255-280, June 2001, Available at SSRN: https://ssrn.com/abstract=279991

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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Fred Goldman

The New School ( email )

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National Bureau of Economic Research (NBER)

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