An Empirical Examination of the Determinants of Insured Municipal Bond Issues

Dwight V. Denison

34 citations0/0 files storedPublic Budgeting &amp Finance

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Credit Risk and Financial Regulations Corporate Finance and Governance Insurance and Financial Risk Management

Abstract

Research demonstrates that there are interest cost savings associated with municipal bond insurance, and yet only half of the bonds are issued with insurance. The theoretical determinants of bond insurance are discussed and evaluated empirically through logistic regression. Statistically significant bond attributes are the underlying credit risk, maturity, par value, and a call option. In addition, regional market characteristics at the time of issue and market segmentations are determinants of bond insurance. These findings strengthen the hypotheses that insurance mitigates market segmentation and that insurers function as delegated monitors of bond quality.

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2012Municipal Bond Insurance Premium, Credit Rating, and Underlying Credit Risk 2010Financial Guarantors and the 2007-2009 Credit Crisis

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