What's in a (School) Name? Racial Discrimination in Higher Education Bond Markets

Citation data:

SSRN Electronic Journal

Publication Year:
2018
Usage 6485
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SSRN
SSRN Id:
2727763
DOI:
10.2139/ssrn.2727763
Author(s):
Dougal, Casey ; Gao, Pengjie ; Mayew, William J.; Parsons, Christopher A.
Publisher(s):
Elsevier BV
Tags:
Race discrimination; higher education; municipal finance
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article description
Historically black colleges and universities (HBCUs) pay higher underwriting fees to issue tax-exempt bonds, compared to similar non-HBCUs. This appears to reflect higher costs of finding willing buyers: the effect is three times larger in the far Deep South, where racial animus remains the most severe. Credit quality plays little role. For example, identical differences are observed between HBCU and non-HBCUs: 1) with AAA ratings, and/or 2) insured by the same company, even before the 2008 Financial Crisis. HBCU-issued bonds are also more expensive to trade in secondary markets, and when they do, sit in dealer inventory longer.