Tax-subsidized underpricing: The market for Build America Bonds
Details
Serval ID
serval:BIB_754BD2304AC3
Type
Article: article from journal or magazin.
Collection
Publications
Institution
Title
Tax-subsidized underpricing: The market for Build America Bonds
Journal
Journal of Monetary Economics
ISSN
0304-3932
Publication state
Published
Issued date
2013
Peer-reviewed
Oui
Volume
60
Number
5
Pages
593-608
Language
english
Abstract
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.
Web of science
Create date
10/05/2017 15:18
Last modification date
21/08/2019 6:12