English, Article edition: Corruption, Political Connections, and Municipal Finance Alexander W. Butler; Larry Fauver; Sandra Mortal

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Physical Description
  • article
Language
  • English

Edition details

Title
  • Corruption, Political Connections, and Municipal Finance
Author
  • Alexander W. Butler
  • Larry Fauver
  • Sandra Mortal
Physical Description
  • article
Notes
  • We show that state corruption and political connections have strong effects on municipal bond sales and underwriting. Higher state corruption is associated with greater credit risk and higher bond yields. Corrupt states can eliminate the corruption yield penalty by purchasing credit enhancements. Underwriting fees were significantly higher during an era when underwriters made political contributions to win underwriting business. This pay-to-play underwriting fee premium exists only for negotiated bid bonds where underwriting business can be allocated on the basis of political favoritism. Overall, our results show a strong impact of corruption and political connections on financial market outcomes. The Author 2009. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For Permissions, please e-mail: journals.permissions@oxfordjournals.org, Oxford University Press.
  • RePEc:oup:rfinst:v:22:y:2009:i:7:p:2673-2705
Language
  • English
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