Innovation, Differentiation, and the Choice of an Underwriter: Evidence from Equity Linked Securities

AFA 2004 San Diego Meetings; International Center for Financial Asset Management and Engineering (FAME) Working Paper

84 Pages Posted: 29 Apr 2003

See all articles by Enrique J. Schroth

Enrique J. Schroth

EDHEC Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: February 10, 2003

Abstract

Investment banks imitate other bank's innovative corporate securities with their own varieties, and compete with the innovator to underwrite new issues. This paper uses data of all the corporate offerings of Equity-Linked and Derivative Securities from the SDC records to estimate the issuer's demand of underwriting services provided by investment banks across different varieties of securities. The results show that, ceteris paribus, the demand for the innovator's variety is larger than for the imitators'. The estimated demand advantage is decreasing in time, and it decreases faster if the security appeared later in a sequence of innovations.

Keywords: Financial Innovation, Investment Banking, Underwriting, First-Mover Advantages, Demand Estimation

JEL Classification: G24, C25, L89

Suggested Citation

Schroth, Enrique J., Innovation, Differentiation, and the Choice of an Underwriter: Evidence from Equity Linked Securities (February 10, 2003). AFA 2004 San Diego Meetings; International Center for Financial Asset Management and Engineering (FAME) Working Paper, Available at SSRN: https://ssrn.com/abstract=384820 or http://dx.doi.org/10.2139/ssrn.384820

Enrique J. Schroth (Contact Author)

EDHEC Business School ( email )

393, Promenade Des Anglais
Nice, 06202
France
+33493186939 (Phone)

HOME PAGE: http://https://www.edhec.edu/en/faculty-and-researchers/schroth-enrique-phd

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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