Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments
58 Pages Posted: 11 Nov 2008
There are 4 versions of this paper
Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments
Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments
Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments
Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments
Date Written: September 2005
Abstract
We investigate the empirical puzzle why banks pressured their analysts to provide aggressiveassessments 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 attract co-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.
Keywords: Underwriting syndicates, Commercial banks, Glass-Steagall Act, Global Settlement, Analyst behavior
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