Universal Banking Deregulation and Firms Choices of Lender and Equity Underwriter

Abstract:     
I empirically examine whether firms engage in one-stop shopping for loans and equity underwriting, following the relaxation of regulatory restrictions. I find that large rated firms often obtain both these services from the same financial intermediary. Such one-stop shopping remains rare among smaller unrated firms. I show that this difference is because unrated firms borrow from geographically proximate, commercial banking lenders. Conversely, in the nationally integrated equity underwriting market, unrated firms value the intermediary's distribution capabilities more than lending relationships or proximity. The results suggest that universal banking has not improved access of more opaque firms to the equity market.

Number of Pages in PDF File: 48

Keywords: universal banking, underwriting, lending, IPOs, one-stop shopping, investment bank, commercial bank

JEL Classification: G28, G21, G24

working papers series