Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments

58 Pages Posted: 11 Nov 2008

See all articles by Alexander Ljungqvist

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Felicia C. Marston

University of Virginia - McIntire School of Commerce

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 4 versions of this paper

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

Suggested Citation

Ljungqvist, Alexander and Ljungqvist, Alexander and Marston, Felicia C. and Wilhelm, William J., Scaling the Hierarchy: How and Why Investment Banks Compete for Syndicate Co-Management Appointments (September 2005). NYU Working Paper No. S-FI-05-02, Available at SSRN: https://ssrn.com/abstract=1297731

Alexander Ljungqvist (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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Belgium

Felicia C. Marston

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-1417 (Phone)

William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

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P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-924-7666 (Phone)
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