Investment-Banking Relationships: 1933-2007
64 Pages Posted: 9 Jan 2014 Last revised: 15 Jul 2017
Date Written: January 8, 2014
We study the evolution of investment-banking relationships from 1933–2007. Relationship exclusivity and client concerns for the state of their banking relationships were strong through the first part of our sample period but then entered a period of sharp decline beginning around 1970. We interpret the bank-client relationship as an informal governance mechanism for curbing opportunistic behavior in a weak contracting environment and examine how technological change aggravated conflicts of interest within investment banks and between banks and their clients. This perspective sheds light on why trust between banks and their clients now appears to be in short supply.
Keywords: Investment Banking, Securities Issuance, Underwriting Syndicates
JEL Classification: G24, G30
Suggested Citation: Suggested Citation