Underwriter Choice When the Issuer Is an Underwriter
52 Pages Posted: 23 Jun 2016 Last revised: 15 May 2018
Date Written: April 11, 2018
This paper examines the debt underwriting relationship for banks. Publicly-traded investment and commercial banks (“banks”) are unique as they are the only firms capable of underwriting their own securities. In nearly 30% of their debt issuances, banks hire another underwriter and do so extensively across bank size, quality, and type. The decision to use another underwriter is related to expertise, information sharing, as well as our newly developed bank-specific (distribution networks, underwriting capacity, and ranking) motivations. The decision to use another underwriter, while likely optimal from the issuer’s perspective, is costly and nearly doubles the per-deal level of underwriting fees.
Keywords: Capital markets, debt issuance, banking, investment banks, underwriting
JEL Classification: G21, G24, G32, G38
Suggested Citation: Suggested Citation