Paper: SSRN 4123366

Abstract

We study how restricting intermediary contracting over ESG policies distorts financial market outcomes. In 2021 Texas prohibited municipalities from hiring bank

Complexity vs Empirical Score

  • Math Complexity: 2.5/10
  • Empirical Rigor: 8.5/10
  • Quadrant: Street Traders — practical and empirical, lighter on theory

Why this score: The paper’s primary analysis relies on standard event-study regressions and difference-in-differences methodology applied to municipal bond data, requiring significant data processing and implementation, but the mathematical depth is limited to basic econometric models.

Research Flowchart

  flowchart TD
  A["Research Question<br>Impact of ESG restrictions<br>on municipal financing"] --> B["Methodology<br>Event Study + Difference-in-Differences"]
  B --> C["Data Sources"]
  C --> D["Municipal Bond Data"]
  C --> E["Bank Contracting Data"]
  C --> F["Texas Policy 2021"]
  D & E & F --> G["Computational Process<br>Estimate spread changes<br>& loan pricing impacts"]
  G --> H["Key Findings"]
  H --> I["+8-10 bps spread increase<br>in Texas municipal bonds"]
  H --> J["Higher borrowing costs<br>for municipalities"]
  H --> K["Market distortion<br>from ESG restrictions"]