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Analyzing Changes in Municipal Bond Ratings: A Different Perspective

Author

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  • Anthony L. Loviscek

    (Division of Business & Economics, Indiana-Purdue University, Fort Wayne, Indiana 46805)

  • Frederick D. Crowley

    (Division of Business & Economics, Indiana-Purdue University, Fort Wayne, Indiana 46805)

Abstract

Do variables that measure economic base diversification, market expansion, population growth, and energy endowment affect municipal bond ratings? To examine this question, we specify and test a linear probability model of changes in municipal bond ratings related to changes in these variables. Using county data for 49 urban areas for 1970 and 1981, we find that changes in each of the variables strongly influence changes in municipal bond ratings. The results suggest that municipal officials and investors can determine the credit condition of a municipality more accurately by using these variables than by using financial accounting variables. The results also indicate that the ratings can represent a unique, market evaluation of the success of local economic development efforts.

Suggested Citation

  • Anthony L. Loviscek & Frederick D. Crowley, 1988. "Analyzing Changes in Municipal Bond Ratings: A Different Perspective," Urban Studies, Urban Studies Journal Limited, vol. 25(2), pages 124-132, April.
    • Handle: RePEc:sae:urbstu:v:25:y:1988:i:2:p:124-132
    DOI: 10.1080/00420988820080171
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    References listed on IDEAS

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    1. Carleton, Willard T & Lerner, Eugene M, 1969. "Statistical Credit Scoring of Municipal Bonds," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(4), pages 750-764, November.
    2. Eisenbeis, Robert A, 1977. "Pitfalls in the Application of Discriminant Analysis in Business, Finance, and Economics," Journal of Finance, American Finance Association, vol. 32(3), pages 875-900, June.
    3. Michel, Allen J., 1977. "Municipal Bond Ratings: A Discriminant Analysis Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 12(4), pages 587-598, November.
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    Cited by:

    1. Tima T. Moldogaziev & Tatyana Guzman, 2015. "Economic Crises, Economic Structure, and State Credit Quality Through-the-Cycle," Public Budgeting & Finance, Wiley Blackwell, vol. 35(4), pages 42-67, December.

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