Unexpected Bond Ratings and the Cost of Municipal Debt

2020 ◽  
Author(s):  
Amanda Beck ◽  
Linda M. Parsons ◽  
Trevor Sorensen
Keyword(s):  
Bond Ratings ◽  
Municipal Debt ◽  
The Cost

Municipal Bond Ratings and Municipal Debt Management

2017 ◽  
pp. 475-514
Author(s):  
Anthony L. Loviscek ◽  
Frederick D. Crowley
Keyword(s):  
Debt Management ◽  
Municipal Bond ◽  
Bond Ratings ◽  
Municipal Debt

Optimality in Municipal Debt: A Comment and Respecification

1979 ◽  
Vol 7 (3) ◽  
pp. 352-363 ◽  
Author(s):  
Patrick J. Sullivan
Keyword(s):  
Time Preference ◽  
Cost Minimization ◽  
Optimal Level ◽  
General Purpose ◽  
Debt Financing ◽  
Policy Implications ◽  
Municipal Debt ◽  
The Cost ◽  
Private Rate

The optimal level of debt financing by municipally owned and operated enterprises is examined, with particular emphasis placed on several misconceptions involved in an earlier article by Robert A. Collins. A respecified cost minimization model, taking the cost of risk bearing and the private rate of time preference into account, is proposed. The resulting policy implications for debt financing are very different from those argued by Collins and from those traditionally made for general-purpose municipal financing.

THE COST OF INCLUDING A CALL PROVISION IN MUNICIPAL DEBT CONTRACTS

1989 ◽  
Vol 12 (3) ◽  
pp. 203-216 ◽  
Author(s):  
Michael F. Spivey
Keyword(s):  
Debt Contracts ◽  
Municipal Debt ◽  
The Cost

The impact of narrative disclosure readability on bond ratings and the cost of debt

2017 ◽  
Vol 22 (2) ◽  
pp. 608-643 ◽  
Author(s):  
Samuel B. Bonsall ◽  
Brian P. Miller
Keyword(s):  
Cost Of Debt ◽  
Bond Ratings ◽  
Narrative Disclosure ◽  
The Cost ◽  
The Impact

scholarly journals Levered-Beta and Cost of Capital Sensitivities: An Experimental Investigation in Capital Structure

2021 ◽  
Vol 14 (4) ◽  
pp. 152
Author(s):  
Kudret Topyan
Keyword(s):  
Capital Structure ◽  
Cost Of Capital ◽  
Weighted Average ◽  
Debt Ratio ◽  
Bond Ratings ◽  
Optimal Capital Structure ◽  
Rating Method ◽  
Optimal Capital ◽  
The Cost ◽  
The Impact

Using US firms with over $5b market cap, this paper tests the impact of levered beta on the firm’s market value and optimal capital structure. Using the synthetic rating method in a recursive model, the paper shows the current and optimal weighted average cost of capital sensitivities as the firm’s market risk measured by beta changes. The paper shows that the change in the value of beta due to alternative leverage levels or other risk factors will alter the cost of capital insignificantly and has no impact on the optimal capital structure due to those firms’ extra-strong bond ratings. As a side-benefit of the synthetic rating method, one may also observe the market-level variables’ impacts on the cost of capital computations and the optimal debt ratio. The paper uses Disney Corporation to show how the synthetic rating methodology helps to disclose the sensitivities of hypothetical alternative leverages.

Information Ambiguity and the Cost of Debt: Evidence from Municipal Bond Ratings

2017 ◽  
Author(s):  
Amanda Beck ◽  
Peter M. Johnson ◽  
Linda M. Parsons
Keyword(s):  
Cost Of Debt ◽  
Municipal Bond ◽  
Bond Ratings ◽  
Information Ambiguity ◽  
The Cost

The GASB No. 34 Impact of Budget-to-Actual Variances on Bond Ratings: Evidence from U.S. Cities

2014 ◽  
Vol 4 (1) ◽  
pp. 32-52 ◽  
Author(s):  
Carolyn M. Callahan ◽  
Tammy R. Waymire
Keyword(s):  
Financial Reporting ◽  
Indirect Evidence ◽  
Managerial Incentives ◽  
Municipal Bond ◽  
Bond Ratings ◽  
Budgetary Slack ◽  
Municipal Debt ◽  
Debt Cost

ABSTRACT We investigate the managerial incentives and debt cost effects associated with budget-to-actual variance disclosures required by the GASB No. 34 reporting model. Empirically, we document associations between variances and municipal bond ratings in a sample of large U.S. cities over the period 2003–2006. We find a disproportionate share of favorable variances for revenues, expenditures, and the net (i.e., surplus/deficit). Further, we show that revenue variances in either direction are associated with lower bond ratings, i.e., precision is important in predicting revenues. In contrast, favorable expenditure variances are associated with higher bond ratings, i.e., imprecision may be tolerated if the variance is favorable. These associations exist despite indirect evidence of managerial incentives to create budgetary slack for both revenues and expenditures. The findings suggest that these disclosures required in the GASB No. 34 financial reporting model indicate factors that influence municipal debt costs.

scholarly journals The impact of positive operating cash on bonds’ pricing international evidence

2015 ◽  
Vol 12 (4) ◽  
pp. 708-717 ◽  
Author(s):  
Harit Satt
Keyword(s):  
Cash Flow ◽  
Cost Of Debt ◽  
Probit Regression ◽  
Cash Balance ◽  
Bond Ratings ◽  
International Evidence ◽  
Cash Flow Statement ◽  
The Cost ◽  
The Impact ◽  
The Relationship

This paper aims to ascertain the relationship existing between the ratings of bonds and the ending cash balance of the operating section in the cash flow statement. In our study, which lasted for 18 years, 600 companies were selected from 26 countries to construct our sample. With purpose of detecting how the positive cash balance of the operating section in the cash flow statement characters the likelihood of rising the bonds ratings, we have applied a Probit regression analysis. Consequently, a robust proof stating that the bonds ratings are significantly impacted by the positive operating cash balance. That is to say, generating enough cash flow from the operating activities increases the company’s chances to have greater bonds ratings raises, meanwhile lowering the cost of debt given that higher bond ratings decreases the cost of company for raising funds (in the form of bonds). More confirmation to the creditors’ rights shields was added through our outcomes, in addition to its impact on the cost of debt.

Economic freedom, the cost of public borrowing, and state bond ratings

2013 ◽  
Vol 5 (1) ◽  
pp. 72-85 ◽  
Author(s):  
Peter T. Calcagno ◽  
Justin D. Benefield
Keyword(s):  
Economic Freedom ◽  
Bond Ratings ◽  
The Cost

scholarly journals Factors Affecting A Municipalitys Bond Rating: An Empirical Study

2011 ◽  
Vol 4 (11) ◽  
Author(s):  
George Palumbo ◽  
Richard Shick ◽  
Mark Zaporowski
Keyword(s):  
Economic Variables ◽  
Bond Ratings ◽  
Municipal Governments ◽  
Bond Rating ◽  
Factors Affecting ◽  
Economic Health ◽  
Economic Developments ◽  
The Cost ◽  
The Impact ◽  
Do So

Creditworthiness, as reflected in bond ratings, is of great interest to municipalities since it directly affects the cost and ability to borrow money.  Municipalities experiencing a decline in their economic health will be especially concerned about how these developments will impact their future bond ratings.  It is well known that municipal analysts closely monitor a community’s economic health since this has an important impact on creditworthiness.  What is less well known however, are the economic variables that influence bond ratings.  The purpose of this paper is to identify these economic variables and estimate to what extent they influence the probability of a municipality’s default.  We do so by developing an econometric model of the rating process.  The model will allow municipal governments to gauge the impact of economic developments on their credit ratings.

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