The major purpose of the study was to determine if relationships existed between selected variables related to the preparation of public school bond offerings for bid and net interest rates and number of bids received by Indiana public school building corporations.The population for the study was defined as Indiana public school building corporations which market first mortgage revenue bonds during any calendar year that existing or comparable legal and bond market conditions may apply.The sample for the study was comprised of 23 Indiana building bonds during the calendar year 1970. Data for the study were obtained through responses of 20 school corporations to a Basic Bond Data Instrument.Seventeen variables were selected from a literature review that have been held as important for receiving favorable school bond interest rates. The following procedures were applied:1. A correlation matrix was computed to determine if significant correlations did, in fact,exist among the seventeen selected experimental variables.2. Step-wise multiple regression analyses were conducted using number of bids and interest rate alternatively as dependent variables. The purpose was to determine the independent variables that served as best predictors for the number of bids and the net interest rate for a bond issue.Major findings permitted the following conclusions to be drawn:The study did not support the notion that effective net interest rates are affected significantly by selected administrative practices classified into five experimental variable categories as legal services, financial planning, prospectus, publicity and notice of bond sale and actual bond sale. Ratings received from Moody's Investors Service, Inc., and Standard and Poor Corporation are not reliable predictors of net interest rates on school bond issues.Lower effective net interest rates can be obtained by keeping the length of bond issue to a minimum number of years.A lower effective net interest rate may likely be obtained by offering bonds for sale during the last quarter of the calendar year. The size of the sample studied restricted the evidence.Amount of previous debt obligation is a strong predictor of effective bond interest rate to be received on a subsequent issue. That is, the lower the level of prior debt, the lower interest rate that may likely be received on a new issue.6. Amount of issue is a strong predictor of the number of bids that may be anticipated for a given bond offering.7. Ratings received by Moody's Investors Service, Inc., are reliable predictors of number of bids to be received. Higher ratings tend to create more interest by bidders.8. Date of issue is a reliable predictor of number of bids. Although the evidence with regard to the best period during the year to sell was not conclusive, the data for 1970 revealed a tendency for a larger number of bids to be received by school building corporations marketing bonds after the first 90 days of the year, that is, after April 1.Recommendations for further study:1. The study should be replicated covering at least a two year period to determine if predictors identified in the study continue to be predictors and remain somewhat consistent with respect to predictability. 2. A similar study should be conducted including neighboring states in the sample to determine if the predictors derived for Indiana bond interest rates and number of bids received remain somewhat consistent across state lines.3. A national study should be conducted which could randomly sample school districts throughout the nation, using variables identified from the study, to determine the best set of predictors for achieving lower effective bond interest rates and a higher number of bidders.3
| Identifer | oai:union.ndltd.org:BSU/oai:cardinalscholar.bsu.edu:handle/176140 |
| Date | January 1973 |
| Creators | Ferguson, Ralph A. |
| Contributors | Patton, Don C. |
| Source Sets | Ball State University |
| Detected Language | English |
| Format | v, 152 leaves ; 28 cm. |
| Source | Virtual Press |
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