The Impact of Commercial Banks on Underwriting Spreads: Evidence from Three Decades

27 Pages Posted: 9 Nov 2018

See all articles by Dongcheol Kim

Dongcheol Kim

Korea University Business School

Darius Palia

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics; Columbia University - Law School

Anthony Saunders

New York University (NYU) - Leonard N. Stern School of Business

Date Written: December 1, 2008

Abstract

This paper examines the effect of commercial bank entry on underwriting spreads for IPOs, SEOs, and debt issues using a long time series that spans 30 years, from 1975 to 2004. We find that, on average, commercial banks charge lower spreads of approximately 72 basis points for IPOs, 43 basis points for SEOs, and 14 basis points for debt over the entire sample period. The economic impact of commercial banks on lowering underwriting spreads is most significant when commercial banks were allowed to enter via Section 20 subsidiaries but persists beyond. Commercial bank entry into underwriting appears to have a procompetitive effect that lasts many years after their initial entry.

Keywords: Initial Public Offering (IPO), Underwriting Spread, Under-Pricing, Costs of Issuing Equities and Debts

JEL Classification: G12, G14

Suggested Citation

Kim, Dongcheol and Palia, Darius and Saunders, Anthony, The Impact of Commercial Banks on Underwriting Spreads: Evidence from Three Decades (December 1, 2008). Journal of Financial and Quantitative Analysis (JFQA), Vol. 43, No. 4, 2008. Available at SSRN: https://ssrn.com/abstract=3267781

Dongcheol Kim (Contact Author)

Korea University Business School ( email )

Anam-Dong, Seongbuk-Gu
Seoul 136-701, 136701
Korea
+82-2-3290-2606 (Phone)

Darius Palia

Rutgers University, Newark, School of Business-Newark, Department of Finance & Economics ( email )

111 Washington Street
MEC 134
Newark, NJ 07102
United States
973-353-5981 (Phone)
973-353-1233 (Fax)

Columbia University - Law School ( email )

435 W 116th St.
New York, NY 10027
United States

Anthony Saunders

New York University (NYU) - Leonard N. Stern School of Business

44 W. 4th St
Suite 9-160
New York, NY 10012
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
7
Abstract Views
57
PlumX Metrics
!

Under construction: SSRN citations will be offline until July when we will launch a brand new and improved citations service, check here for more details.

For more information