State and Local Government Bond Refinancing and the Factors Associated with the Refunding Decision

Moldogaziev, Tima T.; Luby, Martin J.

doi:10.1177/1091142111430954

Cited by 15 publications

(6 citation statements)

References 27 publications

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“…Credit enhancement that bond insurance provides will lower risk exposure for investors (Godfrey and York ); however, due to the collapse of the bond insurance industry in 2008 (Drake and Neale ; Moldogaziev ), the traditional roles of insurance guaranties have shifted (Ely ). Finally, evidence suggests the financial advisor help to solve agency problems at issuance and serve as a positive signal in the financial market (Forbes, Leonard, and Johnson ; Johnson ; Moldogaziev and Luby ; Vijayakumar and Daniels ).…”

Section: Methodsmentioning

confidence: 99%

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Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

Moldogaziev¹,

Kioko²,

Hildreth³

2017

Public Budgeting & Finance

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While bankruptcy protection remains an instrument of last resort, a recent wave of petitions has aroused the interest of key participants in the municipal bond market. To date, 12 states unconditionally authorize municipalities to file for bankruptcy protection, 15 states require that municipalities satisfy certain threshold requirements, while the remaining 23 states either explicitly prohibit or have not specifically provided this authority to municipal governments. As bankruptcy protection rules influence bondholder risk exposures, we empirically test the significance of the state‐specific bankruptcy eligibility requirements on borrowing costs. In a representative sample of general obligation bonds, empirical results suggest that municipalities eligible to file for bankruptcy protection pay a premium. The premium is higher if issuers are unconditionally authorized to file for bankruptcy protection, especially for debt with longer maturities. Findings also show that there are benefits associated with statutory liens; however, these benefits diminish with maturity.

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Section: Methodsmentioning

confidence: 99%

“…The results are robust to inclusion or exclusion of these alternative controls for state tax exemption status. help to solve agency problems at issuance and serve as a positive signal in the financial market (Forbes, Leonard, and Johnson 1992;Johnson 1994;Moldogaziev and Luby 2012;Vijayakumar and Daniels 2006).…”

Section: Control Variablesmentioning

confidence: 99%

Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

Moldogaziev¹,

Kioko²,

Hildreth³

2017

Public Budgeting & Finance

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“…Other issue characteristics that have been typically included in previous studies are associated with matters such as taxable status, insured status, bond type, refinance status, and repayment source (Charles & Shon, 2018;Luby & Moldogaziev, 2013;Moldogaziev et al, 2017;Moldogaziev & Luby, 2012). The variables TAXABLE and AMT reflect the fact that some bonds are federally taxable and/or subject to Alternative Minimum Tax respectively.…”

Section: Ta B L E 1 Descriptive Statisticsmentioning

confidence: 99%

Does the charter form lead to lower borrowing costs? Examining the case of California local governments

Kim

McDonald

Shon

2021

Ann Public Coop Econ

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In this paper, we examine the impact of the charter form of government on the borrowing costs of local governments. A substantial amount of research has been undertaken to date in which scholars have investigated the determinants of borrowing costs for governments.However, little research has been conducted hitherto on the impact that the particular form of government -a key issuer characteristic -has on determining its specific borrowing costs. We hypothesized that a chartered government is more likely to be able to reduce its borrowing costs when it is benefiting from the municipal bond market; a government's flexibility and professionalism is desirable. We tested this hypothesis by using city and county government bond data from California that dates from 2003 to 2015. In our findings, we show that the financial flexibility that is afforded by a charter helps local governments to improve their credit ratings and to lower their borrowing costs.

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“…However, these papers do not provide estimates of the actual NPV effects of a typical advance refunding. Empirical studies by Vijayakumar () and Moldogaziev and Luby () examine the determinants of advance refunding, but do not study the value effects. Fischer () uses the public announcement of an advance refunding to examine the efficiency of the municipal bond market.…”

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confidence: 99%

Advance Refundings of Municipal Bonds

Ang¹,

Green²,

Longstaff³

et al. 2017

The Journal of Finance

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The advance refunding of debt is a widespread practice in municipal finance. In an advance refunding, municipalities retire callable bonds early and refund them with bonds with lower coupon rates. We find that 85% of all advance refundings occur at a net present value loss, and that the aggregate losses over the past 20 years exceed $15 billion. We explore why municipalities advance refund their debt at loss. Financially constrained municipalities may face pressure to advance refund since it allows them to reduce short‐term cash outflows. We find strong evidence that financial constraints are a major driver of advance refunding activity.

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State and Local Government Bond Refinancing and the Factors Associated with the Refunding Decision

Cited by 15 publications

References 27 publications

Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

Impact of Bankruptcy Eligibility Requirements and Statutory Liens on Borrowing Costs

Does the charter form lead to lower borrowing costs? Examining the case of California local governments

Advance Refundings of Municipal Bonds

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