What's in a (school) name? Racial discrimination in higher education bond markets

Historically black colleges and universities (HBCUs) pay higher underwriting fees to issue tax-exempt bonds, compared with similar non-HBCUs, apparently reflecting higher costs of finding willing buyers. The effect is three times larger in the Deep South, where racial animus remains the most severe. Credit quality plays little role. For example, identical differences are observed between HBCU and non-HBCUs with AAA ratings or when insured by the same company, even before the 2007-2009 financial crisis. HBCU-issued bonds are also more expensive to trade in secondary markets and, when they do, sit in dealer inventory longer. (C) 2019 Elsevier B.V. All rights reserved.