Does the Quality of Financial Advice Affect Prices?

Using a large data sample of 58,562 new municipal issues covering the period from 1984 to 2002, we examine whether the quality of advice provided by a financial advisor affects new issue interest costs. We find that higher quality financial advisors are associated with statistically significant decreases in new issue yields. The effect of advisor quality on yields is more pronounced for revenue, negotiated, and opaque bond issues than for general obligation and competitively sold issues. However, issuers of revenue or negotiated bonds are more likely to choose a low quality advisor.

Financial Review, Vol. 45, Issue 2, pp. 387-414, May 2010

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Researcher Information

	Allen, Arthur C Associate Professor of Accountancy Expertise: Financial Accounting Governmental and Nonprofit Accounting Accountancy CBA 388 P.O. Box 880488 University of Nebraska-Lincoln Lincoln, NE 68588-0488, USA Phone: (402) 472-3275 Fax: (402) 472-4100 aallen1@unl.edu	Allen, Arthur C	Accountancy
	Dudney, Donna Associate Professor of Finance Expertise: Financial Institutions Financial Markets & Investing Managerial Economics Finance CBA 243 P.O. Box 880490 University of Nebraska-Lincoln Lincoln, NE 68588-0490, USA Phone: (402) 472-5695 Fax: (402) 472-5140 ddudney@unl.edu	Dudney, Donna	Finance