04/09/2021 | Location: Zoom | Time: 10:00 am - 12:00 pm
Title of Seminar: Pay Now, Play Later: Political Connections and Underwriting Relationships in the Muni Market
Z. Jay Wang, University of Oregon

ABSTRACT: Using a novel data set of political contributions, we investigate the motivation and impact of political connections in the U.S. municipal bond primary market. We find underwriters that make multi-small donations (multiple donations under the de minimis limit of $250) to campaign candidates experience a significant increase of 3% in their negotiated market share. Employing a difference-in-differences approach under G-37’s restrictions, we find large donations (donations above the de minimis limit of $250) are associated with a significant increase in underwriter’s market share with a two-year delay. The effect is stronger when an underwriter is connected with more political officials. Further, we find that regional underwriters are more likely to make multi-small donations to their home states and national underwriters are more likely to choose large donations in states where they have poor business performance and states with high market growth in negotiated sales. We provide evidence that underwriters donate to political parties in states where they have strong business relations. Our findings suggest that underwriters apply a mixture of contribution strategies to establish connections with issuer officials even after the implementation of G-37 and political connections still play an influential role in the municipal bond market.

Z. Jay Wang's bio: 

Z. Jay Wang is an associate professor in the Department of Finance and Alumni Investment Management Research Scholar at the Lundquist College of Business. His expertise includes asset management, institutional investors, and market liquidity. His research has been published in journals such as Journal of Financial Economics, Review of Financial Studies, Journal of Financial Quantitative Analysis, Journal of Financial Intermediation, and Contemporary Accounting Research.

Wang received two PhD degrees in finance and economics from University of Michigan at Ann Arbor and Iowa State University respectively. Before joining the Lundquist College, he was an assistant professor of finance at the University of Illinois at Urbana-Champaign. He also held a position as a research economist for the National Bureau of Economic Research from 2015 to 2017.

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Title of Seminar: TBD
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