Complex Securities and Underwriter Reputation: Do Reputable Underwriters Produce Better Securities?

111 Pages Posted: 1 Jul 2012 Last revised: 1 Mar 2014

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

Richard Lowery

University of Texas-Austin

Alessio Saretto

Federal Reserve Banks - Federal Reserve Bank of Dallas

Date Written: February 28, 2014

Abstract

Conventional wisdom suggests that high-reputation banks will generally produce good securities to maintain their long-run reputation. We show with a simple model that when securities are complex a high-reputation bank may produce assets that underperform during market downturns. We examine this possibility using a unique sample of 10.1 trillion dollars of CLO, MBS, ABS, and CDOs. Contrary to the conventional view, securities issued by more reputable banks did not outperform but, rather, had higher proportions of capital in default.

Keywords: complex securities, reputation, CDO, ABS, MBS, CLO

Suggested Citation

Griffin, John M. and Lowery, Richard and Saretto, Alessio, Complex Securities and Underwriter Reputation: Do Reputable Underwriters Produce Better Securities? (February 28, 2014). Available at SSRN: https://ssrn.com/abstract=2097203 or http://dx.doi.org/10.2139/ssrn.2097203

John M. Griffin

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Richard Lowery

University of Texas-Austin ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Alessio Saretto (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Dallas ( email )

2200 North Pearl Street
PO Box 655906
Dallas, TX 75265-5906
United States

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