1. Connect issuer sophistication to portfolio design: Less financially sophisticated issuers may pose greater disclosure or governance risk, but they may also exercise call options less efficiently. For some investors, that trade-off may be attractive.
2. Reinterpret yield differences: A higher yield on a callable bond from an advisor-heavy issuer may simply compensate for higher call probability. Yield alone can be misleading without conditioning on issuer behavior.
3. Look beyond the first call date: Advance refundings and redemption mechanics matter as much as stated call provisions. Advisors facilitate these transactions, expanding the practical reach of the call option.
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Chen, H., Cohen, L., and Liu, W. 2024. “Calling All Issuers: The Market for Debt Monitoring.” Management Science 71(8): 6367—6391.
Garrett, D. G. 2024. “Conflicts of Interest in Municipal Bond Advising and Underwriting.” Review of Financial Studies 37, no. 12: 3835–3876.
Garrett, D.G., and Malakar, B. 2026. “The Evolving Role of 21st Century Municipal Finance Advisors.” Public Budgeting & Finance 0: 1-24.
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