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The Effect of Private-Debt Underwriting Reputation on Bank Public-Debt UnderwritingRajesh P. NarayananLouisiana State University Kasturi P. RanganCase Western Reserve University - Department of Banking & Finance Nanda K. RanganVirginia Commonwealth University Review of Financial Studies, Forthcoming Abstract: We provide evidence that commercial banks extend their reputation in underwriting syndicated loans and private placements (private debt) to their bond underwriting activities. In the absence of bond-market reputation, private-debt-market reputation enables commercial banks to win underwriting mandates from their loan clients. Further, it allows them to credibly commit to investors against opportunistically using lending information and thereby deliver superior certification benefits in the form of higher issue prices relative to investment-bank underwriters. This pricing benefit is not offset by higher underwriting fees, and thus results in lower total issuance costs for borrowers.
Keywords: Underwriting, Certification, Reputation extension JEL Classification: G21, G24, L51 Accepted Paper SeriesDate posted: August 12, 2006Suggested CitationContact Information
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