What's in a (School) Name? Racial Discrimination in Higher Education Bond Markets

Historically black colleges and universities (HBCUs) pay higher underwriting fees to issue tax-exempt bonds, compared to similar non-HBCUs. This appears to reflect higher costs of finding willing buyers: the effect is three times larger in the far Deep South, where racial animus remains the most severe. Credit quality plays little role. For example, identical differences are observed between HBCU and non-HBCUs: 1) with AAA ratings, and/or 2) insured by the same company, even before the 2008 Financial Crisis. HBCU-issued bonds are also more expensive to trade in secondary markets, and when they do, sit in dealer inventory longer