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

Posted: 21 Mar 2001

See all articles by Ivan C. Roten

Ivan C. Roten

Appalachian State University - John A. Walker College of Business

Donald J. Mullineaux

University of Kentucky - Gatton College of Business and Economics

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Abstract

We compare underwriting performance by commercial bank-affiliated firms (Section 20's) and traditional investment banks over the period 1995-98. We find that gross spreads are 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: Debt, underwriting, Section 20 subsidiaries, gross spreads, yield spreads, bank holding companies

JEL Classification: G12, G21, G24, G30, D82

Suggested Citation

Roten, Ivan C. and Mullineaux, Donald J., Debt Underwriting by Commercial Bank-Affiliated Firms and Investment Banks: More Evidence. Available at SSRN: https://ssrn.com/abstract=261772

Ivan C. Roten (Contact Author)

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)

Donald J. Mullineaux

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)

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