Abstract

http://ssrn.com/abstract=1297732
 
 

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Sharing Underwriters with Rivals: Implications for Competition in Investment Banking


John Asker


New York University - Leonard N. School of Business - Department of Economics

Alexander Ljungqvist


New 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)

December 2005

NYU Working Paper No. S-FI-05-03

Abstract:     
We conjecture that issuing firms seek to avoid sharing underwriters with their product-market rivals in order to limit the risk that strategically sensitive information is leaked to a rival firm via the underwriter relationship. We investigate this conjecture in a sample of 5,272 equity deals and 12,453 debt deals by large U.S. firms between 1975 and 2003. Using several distinct sources of identification, we find that this phenomenon is at least as important in determining the choice of lead underwriter as the bank's reputation or the issuing firm's existing relationship with the underwriter. We argue that this finding has important implications for understanding the nature of competition among investment banks, the durability of underwriting relationships, the success of entrants, and the likely impact of investment bank mergers on market power.

Number of Pages in PDF File: 52

Keywords: Investment banking, Securities underwriting, Competition; Entry, Glass-Steagall Act;, Commercial banks.

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Date posted: November 11, 2008  

Suggested Citation

Asker, John and Ljungqvist, Alexander, Sharing Underwriters with Rivals: Implications for Competition in Investment Banking (December 2005). NYU Working Paper No. S-FI-05-03. Available at SSRN: http://ssrn.com/abstract=1297732

Contact Information

John William Asker (Contact Author)
New York University - Leonard N. School of Business - Department of Economics ( email )
269 Mercer Street
New York, NY 10003
United States
212-998-0062 (Phone)
HOME PAGE: http://pages.stern.nyu.edu/~jasker/
Alexander Ljungqvist
New York University (NYU) - Department of Finance ( email )
Stern School of Business
44 West 4th Street, Suite 9-160
New York, NY 10012-1126
United States
212-998-0304 (Phone)
212-995-4220 (Fax)
HOME PAGE: http://pages.stern.nyu.edu/~aljungqv
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Research Institute of Industrial Economics (IFN) ( email )
Box 55665
Grevgatan 34, 2nd floor
Stockholm, SE-102 15
Sweden
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