2024/06/21 by Baridhi Malakar, Malakar, Baridhi
Economics, Econometrics and Finance · #FOS: Economics and business #Fiscal Policies and Political Economy #Fiscal Policy and Economic Growth #General Finance (q-fin.GN)
paper · pdf · doi:10.48550/arxiv.2406.15197
openalex publication_date 2024/06/21 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28
I examine whether the imposition of fiduciary duty on municipal advisors affects bond yields and advising fees. Using a difference-in-differences analysis, I show that bond yields reduce by ∼9% after the imposition of the SEC Municipal Advisor Rule due to lower underwriting spreads. Larger municipalities are more likely to recruit advisors after the rule is effective and experience a greater reduction in yields. However, smaller issuers do not experience a reduction in offering yields after the SEC Rule. Instead, their borrowing cost increases if their primary advisor exits the market. Using novel hand-collected data, I find that the average advising fees paid by issuers does not increase after the regulation. Overall, my results suggest that while fiduciary duty may mitigate the principal-agent problem between some issuers and advisors, there is heterogeneity among issuers.