Advance Refundings of Municipal Bonds

• 成果类型: Article
• 署名作者: Ang, Andrew; Green, Richard C.; Longstaff, Francis A.; Xing, Yuhang
• 署名单位: Columbia University; National Bureau of Economic Research; Carnegie Mellon University; University of California System; University of California Los Angeles; Rice University
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.12506
• 发表日期: 2017
• 页码: 1645-1681
• 关键词: Heteroskedasticity; state

摘要

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.