When the Issuer is an Underwriter: The Costs and Benefits of Underwriter Choice
66 Pages Posted: 23 Jun 2016 Last revised: 19 Mar 2021
Date Written: March 16, 2021
Abstract
This paper examines the debt underwriting relationship of publicly-traded U.S. banks (investment and commercial banks). In nearly 30% of their debt issuances, banks hire an external underwriter. This selection is related to our newly developed bank-specific motivations, including underwriting capacity, distribution networks, ranking and the bank’s current competitive position, in addition to traditional needs such as expertise and information sharing. We find that the decision to use another underwriter has implications for bank issuers at the deal level as well as at the firm level, and ultimately can affect a bank’s reputation, networking, and profitability.
Keywords: Capital markets; debt issuance; underwriting; reputation; banks
JEL Classification: G21, G24, G32, D22
Suggested Citation: Suggested Citation