Abstract
This study examines the influence of bond issuer's social capital on underwriting fees. Investors rely on accurate information to evaluate bond quality, while underwriters assume inventory risk stemming from uncertain investor demand. We posit that social capital enhances the quality of information disclosed by the issuer, consequently impacting the fees underwriters charge for bearing this risk. Utilizing data on new tax-exempt municipal bonds issued from U.S. counties over the period 1990–2017, we find that underwriters charge significantly lower fees for bonds issued from counties with higher social capital. This result remains robust after controlling for issuer and bond characteristics, as well as addressing potential endogeneity concerns. Further investigations show that the observed effect persists only in situations where underwriters bear greater risk, suggesting that social capital functions as a valuable form of certification within the underwriting process.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
