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What’s in a (school) name? Racial discrimination in higher education bond markets

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  • Dougal, Casey
  • Gao, Pengjie
  • Mayew, William J.
  • Parsons, Christopher A.

Abstract

Historically black colleges and universities (HBCUs) pay higher underwriting fees to issue tax-exempt bonds, compared with similar non-HBCUs, apparently reflecting higher costs of finding willing buyers. The effect is three times larger in the 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 with AAA ratings or when insured by the same company, even before the 2007–2009 financial crisis. HBCU-issued bonds are also more expensive to trade in secondary markets and, when they do, sit in dealer inventory longer.

Suggested Citation

  • Dougal, Casey & Gao, Pengjie & Mayew, William J. & Parsons, Christopher A., 2019. "What’s in a (school) name? Racial discrimination in higher education bond markets," Journal of Financial Economics, Elsevier, vol. 134(3), pages 570-590.
    • Handle: RePEc:eee:jfinec:v:134:y:2019:i:3:p:570-590
    DOI: 10.1016/j.jfineco.2019.05.010
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    More about this item

    Keywords

    Municipal bonds; Discrimination; Historically black college and university;
    All these keywords.

    JEL classification:

    • H75 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Government: Health, Education, and Welfare
    • I24 - Health, Education, and Welfare - - Education - - - Education and Inequality
    • J15 - Labor and Demographic Economics - - Demographic Economics - - - Economics of Minorities, Races, Indigenous Peoples, and Immigrants; Non-labor Discrimination

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