Tax-subsidized underpricing: The market for Build America Bonds

• 成果类型: Article
• 署名作者: Cestau, Dario; Green, Richard C.; Schuerhoff, Norman
• 署名单位: Carnegie Mellon University; University of Lausanne; University of Geneva; Centre for Economic Policy Research - UK
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2013.04.010
• 发表日期: 2013
• 页码: 593-608

摘要

Build America Bonds (BABs) were issued by municipalities for 20 months as a part of the 2009 fiscal package. Unlike traditional tax-exempt municipals, BABs are taxable to the holder, but the Treasury rebates 35% of the coupon to the issuer. The stated purpose was to provide municipalities access to a more liquid market including foreign, tax-exempt, and tax-deferred investors. We find BABs do not exhibit greater liquidity than traditional municipals. BABs are more underpriced initially, particularly for interdealer trades. BABs also show a substitution from underwriter fees toward more underpricing, suggesting that the underpricing is a strategic response to the tax subsidy. (c) 2013 Elsevier B.V. All rights reserved.