A professor at Duke University’s Fuqua School of Business, Bill Mayew, and his colleagues said that the country’s 107 historically black colleges and universities (HBCUs) have been targets of “racial animus” by wealthy white investors, according to reports. The study provided empirical evidence using more than 20 years of public data to support their argument.

Asked whether race appears to impose higher search costs on underwriters and bond traders for black colleges, Mayew responded saying these institutions find it “more difficult” for underwriters to sell bonds compared to PWIs.

“We had to rule out alternative explanations and rule in racism,” Mayew said in an interview. “To reap the largest benefit from the state tax breaks that accompany municipal bonds, investors tend to buy bonds that are issued in their own states. So if you’re a school in Louisiana, your investor audience is wealthy people in Louisiana. This allows us to better identify race effects. If race is making it more difficult to sell HBCU bonds, then we should see larger effects in states where there has historically been higher racial animus.”

Professor Bill Mayew finds evidence that race is driving up trader fees for HBCUs

Mayew also said that he and his colleagues “found HBCU issuance costs are about 20 percent higher than non-HBCUs” noting that black colleges in particular in the South (Louisiana, Alabama and Mississippi) “were paying underwriters three times more to place their bonds relative to HBCUs in other states.”

“Finding a solution is difficult because no one’s breaking the law,” Mayew said. “To make this go away, you have to make the search costs go down. One way to do that is to make the state tax benefit transferable, so schools can better attract buyers from other states. But that would require coordination and compromise among political leaders, which is difficult.”