Abstract
This article examines how various market and institutional mechanisms resolve information asymmetry problems in the municipal bond market in the U.S. Information asymmetry exists in this market since a significant percentage of the investors are individuals on one side and many of the issuers are infrequent and relatively small ones on the other side. Using a two-stage switching regression model, we find that these mechanisms, including self-certification, method of sale, underwriter certification, and underlying credit ratings for insured municipal bonds, all help resolve information asymmetry problems and thus reduce borrowing cost for the issuers.
Original language | English (US) |
---|---|
Pages (from-to) | 226-238 |
Number of pages | 13 |
Journal | Journal of Economics and Finance |
Volume | 28 |
Issue number | 2 |
DOIs | |
State | Published - 2004 |
ASJC Scopus subject areas
- Finance
- Economics and Econometrics