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Scaling the Hierarchy: How and Why Investments Banks Compete for Syndicate Co-Management AppointmentsAlexander LjungqvistNew York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); Research Institute of Industrial Economics (IFN) Felicia C. MarstonUniversity of Virginia - McIntire School of Commerce William J. WilhelmUniversity of Virginia - McIntire School of Commerce September 2005 NYU Working Paper No. FIN-05-027 Abstract: We investigate the empirical puzzle why banks pressured their analysts to provide aggressive assessments of issuing firms during the 1990s when doing so apparently had little positive effect on their chances of receiving lead-management appointments and ultimately led to regulatory penalties and costly structural reform. We show that aggressively optimistic research can attractco-management appointments and that co-management appointments eventually lead to more lucrative lead-management opportunities. Our results suggest a potential unintended anticompetitive effect of the Global Settlement if forcing greater separation of research and investment banking diminishes co-management opportunities for (and thereby potential competition from) marginal competitors in securities underwriting, especially in the debt markets.
Number of Pages in PDF File: 57 Keywords: Underwriting syndicates, Commercial banks working papers seriesDate posted: November 3, 2008Suggested CitationContact Information
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