What's in a (School) Name? Racial Discrimination in Higher Education Bond Markets
69 Pages Posted: 5 Feb 2016 Last revised: 27 Jun 2018
Date Written: June 16, 2018
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.
Keywords: Race discrimination, higher education, municipal finance
JEL Classification: H75, I24, J15
Suggested Citation: Suggested Citation