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
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: Suggested Citation