Distance Still Matters: Evidence from Municipal Bond Underwriting

37 Pages Posted: 6 Nov 2002

See all articles by Alexander W. Butler

Alexander W. Butler

Rice University - Jesse H. Jones Graduate School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 2007

Abstract

Using a sample of municipal bond offerings, I find that "local" investment banks have substantial comparative and absolute advantages over non-local counterparts - locals charge lower fees and sell bonds at lower yields. Local investment banks' strongest comparative advantage is at underwriting bonds with higher credit risk and bonds not rated by rating agencies. These findings suggest that high risk bonds and non-rated bonds are more difficult to evaluate and market, and that investment banks with a local presence are better able to assess "soft" information and place difficult bond issues.

Keywords: municipal bonds, investment bank fees, local underwriters, soft information, geography

JEL Classification: G24, G28, M41, M45

Suggested Citation

Butler, Alexander W., Distance Still Matters: Evidence from Municipal Bond Underwriting (January 2007). Available at SSRN: https://ssrn.com/abstract=334080 or http://dx.doi.org/10.2139/ssrn.334080

Alexander W. Butler (Contact Author)

Rice University - Jesse H. Jones Graduate School of Business ( email )

MS 531
Houston, TX 77005
United States
713-348-6341 (Phone)

HOME PAGE: http://www.owlnet.rice.edu/~awbutler/

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