Effect Of Legal Counsel Activity On The Cost Of Municipal Bond Offerings

Abstract

The authors examine the relationship between interest cost to the issuer of municipal bonds and legal counsel associated with the offering. Modeling interest cost with explanatory variables reflecting legal counsel, issue characteristics, and conditions in the financial markets, the authors conclude that offerings in which an active bond counsel participated had average interest costs statistically significantly lower than those without such counsel. Offerings involving issuer=s counsel and activity of underwriter=s counsel experienced statistically higher average interest costs than otherwise. The authors note that their results are consistent with the certification hypothesis.