Essays in State and Local Government Debt Management: Networks, Strategic Refinancing, and Regulatory Disclosure

摘要

This three-essay dissertation attempts to fill research gaps in three streams of literature on municipal debt management. The first essay focuses on stability of debt management networks. Debt network stability is the extent to which municipal issuers repeatedly use the same financial intermediaries to issue new bonds. The essay examines whether network stability lowers subnational governments' new issue borrowing costs in primary markets for municipal bonds. The analytical design combines social network theory and cross-sectional modeling and centers on state debt management networks in California. Findings show that after a critical threshold of repeat issuer-intermediary interactions is attained, municipal borrowing costs tend to decrease as networks become more stable.;The second essay analyzes strategic refinancing decisions in primary markets for municipal bonds. It focuses on school district debt refinancing transactions and quantifies the opportunity costs, or option value loss, associated with the timing of transactions. The essay uses Monte Carlo simulation and financial option-pricing techniques to analyze a random sample of Texas school district bonds. Findings show that school districts' refinancing transactions resulted in option value loss equivalent to millions of dollars.;In the third essay, I investigate the extent to which regulatory interventions in municipal bond secondary markets reduce inefficiencies in municipal securities pricing. In particular, I analyze the trade price impacts of the 2008 implementation of new disclosure interventions. I apply time series regressions, with robustness checks, to a large dataset of trades in California's general obligation bonds. Results show that the interventions reduced pricing inefficiencies in secondary markets as a whole; however, institutional investors continue to have a marginal price advantage over retail investors in securities trading.;The three essays shed more light on debt management in primary and secondary markets for municipal bonds. They cover some of the frontier research topics on debt issuance, refinancing, and trading. The essays provide a way to gauge the efficient level of interdependence in debt management networks, present an empirical framework for evaluating the timing of school district debt refinancing transactions, and offer insights that should guide regulatory policy discussions on fair pricing of debt securities.