Study Finds That HBCUs Are Charged Higher Fees to Issue Bonds

bag_of_moneyA new study by scholars at Drexel University in Philadelphia, the University of Notre Dame in Indiana, Duke University in North Carolina, and the University of California, San Diego, finds that historically Black colleges and universities pay a higher underwriting fee for debt issues than predominantly White institutions even when credit reporting agencies rate the debt issues as having similar risk.

The researchers examined more than 4,100 bond issues in the period from 1988 to 2010. Of these bond issues, 102 were from 45 different historically Black colleges or universities. For institutions with the same bond ratings, the HBCUs incurred an average underwriting fee of $290,000 for  a $30 million bond. For comparable predominantly White colleges and universities, the issuance of a $30 million bond cost these institutions, on average, $242,000.

The authors conclude that “the high spreads HBCUs are charged reflect, in turn, high selling costs born by underwriters. Indeed, conversations with municipal bond traders suggest that bonds issued by HBCUs are particularly illiquid, or in industry parlance, ‘harder to place.’ Further, it is perceived that racial animus by potential investors is the source of this illiquidity.”

The paper, “What’s in a (School) Name? Racial Discrimination in Higher Education Bond Markets,” was published by the Social Science Research Network. It may be downloaded by clicking here.

Related Articles

Leave a Reply

Get the JBHE Weekly Bulletin

Receive our weekly email newsletter delivered to your inbox

Latest News

Graduate Enrollment Surges at Winston-Salem State University

In fall 2024, Winston-Salem State University enrolled 244 new graduate students, an increase of 31.2 percent from the prior year. The HBCU now enrolls nearly 600 graduate students.

Two Black Women College Presidents Announce Their Retirements

Gilda Barbino, president of Olin College of Engineering, and Soraya Coley, president of Cal Poly, Pomona, have announced their plans to retire at the end of this academic year. Both Dr. Barbino and Dr. Coley are the first woman presidents of their institutions.

Norfolk State University to Construct a $118 Million STEM Facility

As part of an ongoing $90 million fundraising campaign, Norfolk State University has announced plans to establish a 131,000-square-foot STEM building to advance its research capabilities and science academic programming.

Two Black Men Selected for Academic Appointments at Universities

The faculty members with new appointments are Christopher Small at Florida State University and Dwight McBride at Washington University in St. Louis.

Featured Jobs