Mendoza School of Business

Racial bias in school bonds

Published: November 8, 2018 / Author: BizEd

Finance professor Paul Gao‘s paper “What’s in a (School) Name? Racial Discrimination in Higher Education Bond Markets,” forthcoming in the Journal of Financial Economics, was featured in BizEd.

In the paper, the scholars look for other factors that could explain the difference in fees, such as attributes specific to each school, credit ratings, and state tax breaks. But they conclude that “racial animus” was the main cause. The researchers also note that the effect of this bias is three times more pronounced in the Deep South states of Louisiana, Alabama, and Mississippi.