"Competitive Bidding for Municipal Bonds: New Test of the Underwriter Search Hypothesis".

• Position: Abstract - Brief Article

Leonard

Paul A.

Municipal Finance Journal, Winter 1999, PP. 18-36.

Although this article makes no claim as to whether negotiated or competitive bond sales are more efficient for all bond sales, it does argue that competitive sales save costs for certain types of issues. Based on his research, the author discovered that net interest cost savings were greatest with a competitive sale for unrated issues, small issues, and first-time issuers when the underwriter conducts a large search for investors. Cost savings are generally a result of additional bidding. This is because it is assumed that the underwriter has specialized knowledge of what his/her customers will pay for the bonds and that knowledge is...