Debt Underwriting by Commercial Bank-Affiliated Firms and Investment Banks: More Evidence

University of Kentucky School of Manangement Working Paper

40 Pages Posted: 21 Aug 2000

See all articles by Donald J. Mullineaux

Donald J. Mullineaux

University of Kentucky - Gatton College of Business and Economics

Ivan C. Roten

Appalachian State University - John A. Walker College of Business

Multiple version iconThere are 2 versions of this paper

Date Written: June 2000

Abstract

We examine underwriting performances by commercial bank-affiliated firms (Section 20's) and traditional investment banks over the period 1995-98. We find that gross spreads are significantly lower in the case of Section 20 underwritings, but that yield spreads are not. Our sample includes a substantial number of observations following changes in Federal Reserve policies that substantially eased restrictions on Section 20 activities in early 1997. Our findings differ somewhat from results in the literature that focused on periods prior to these policy changes. We find, for example, no evidence that a prior commercial-bank lending relationship influences underwriting yields for any type of issue. Our results also fail to confirm earlier evidence that collective Section 20 underwritings produce a favorable competitive effect on gross spreads and yield spreads. We find substantial evidence that both the underwriting mix and the underwriting process are relevant to the behavior of gross spreads and yield spreads over the sample period.

Keywords: Underwriting, debt, gross spreads, yield spreads, Section 20 subsidiaries

JEL Classification: G21, G24

Suggested Citation

Mullineaux, Donald J. and Roten, Ivan C., Debt Underwriting by Commercial Bank-Affiliated Firms and Investment Banks: More Evidence (June 2000). University of Kentucky School of Manangement Working Paper, Available at SSRN: https://ssrn.com/abstract=236843 or http://dx.doi.org/10.2139/ssrn.236843

Donald J. Mullineaux (Contact Author)

University of Kentucky - Gatton College of Business and Economics ( email )

550 South Limestone
Lexington, KY 40506
United States
859-257-2890 (Phone)
859-257-9688 (Fax)

Ivan C. Roten

Appalachian State University - John A. Walker College of Business ( email )

Department of Finance, Banking, and Insurance 3066 Raley Hall
Boone, NC 28608
United States
828.262.6943 (Phone)
828.262.6612 (Fax)

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