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Competitive versus Negotiated Underwriting of Public Utility Debt

Author

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  • Edward A. Dyl
  • Michael D. Joehnk

Abstract

The question as to whether competitive bidding or negotiated underwriting is the least-cost method for distributing new issues of public utility bonds remains largely unresolved. This study analyzes the costs on such new issues during the period from January, 1972, through August, 1974. The results indicate that, in general, competitive bidding was the least-cost method of distributing public utility obligations during this period. An analysis of the relationship between issue size, underwriting arrangement (i.e., competitive versus negotiated), and underwriters' charges does, however, suggest that negotiated underwriting may be the preferable alternative in certain circumstances.

Suggested Citation

  • Edward A. Dyl & Michael D. Joehnk, 1976. "Competitive versus Negotiated Underwriting of Public Utility Debt," Bell Journal of Economics, The RAND Corporation, vol. 7(2), pages 680-689, Autumn.
    • Handle: RePEc:rje:bellje:v:7:y:1976:i:autumn:p:680-689
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    Cited by:

    1. Roger D. Stover, 1983. "The Interaction Between Pricing And Underwriting Spread In The New Issue Convertible Debt Market," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 6(4), pages 323-332, December.
    2. M. Chapman Findlay III & Keith B. Johnson & T. Gregory Morton, 1979. "An Analysis Of The Flotation Cost Of Utility Bonds, 1971–76," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 2(2), pages 133-142, September.
    3. Logue, Dennis E. & Tinic, Seha M., 1999. "Optimal choice of contracting methods: negotiated versus competitive underwritings revisited," Journal of Financial Economics, Elsevier, vol. 51(3), pages 451-471, March.
    4. Kriz, Kenneth A., 2003. "Comparative costs of negotiated versus competitive bond sales: new evidence from state general obligation bonds," The Quarterly Review of Economics and Finance, Elsevier, vol. 43(2), pages 191-211.

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