Which Factors Affect Bond Underwriting Fees? The Role of Banking Relationships

Posted: 17 Oct 2007

See all articles by Giuliano Iannotta

Giuliano Iannotta

Università Cattolica

Marco A. Navone

Finance Discipline Group - UTS Business School; Bocconi University - CAREFIN - Centre for Applied Research in Finance; Financial Research Network (FIRN)

Abstract

The question of which factors are relevant in determining bond underwriting fees is empirically investigated by analyzing 2,202 bond issues completed by European firms during the 1993-2003 period. Four major results emerge from the analysis. First, the introduction of the single currency in 1999 has generated an increase in competition among banks, and, as a result, a reduction in underwriting fees. Second, a strong relationship with the issuer's main bank reduces the level of underwriting fees. Third, new issuers are charged with lower underwriter fees relative to firms that have completed issues without building any strong relationship with a bank. Fourth, higher reputation banks charge lower underwriting fees. The implications of these findings are also discussed.

Keywords: Undewriting, Relationship, European bonds

JEL Classification: G20, G24, L14

Suggested Citation

Iannotta, Giuliano and Navone, Marco A., Which Factors Affect Bond Underwriting Fees? The Role of Banking Relationships. European Financial Management Journal, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1021698

Giuliano Iannotta

Università Cattolica ( email )

20123 Milano
Italy

Marco A. Navone (Contact Author)

Finance Discipline Group - UTS Business School ( email )

Haymarket
Sydney, NSW 2007
Australia

Bocconi University - CAREFIN - Centre for Applied Research in Finance

Via Sarfatti, 25
Milan, 20136
Italy

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

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