On the Benefits of Concurrent Lending and Underwriting

50 Pages Posted: 18 Nov 2004

See all articles by Steven Drucker

Steven Drucker

Renaissance Technologies LLC - Meritage Group

Manju Puri

Duke University - Fuqua School of Business; NBER; FDIC

Abstract

This article examines whether there are efficiencies that benefit issuers and underwriters when a financial intermediary concurrently lends to an issuer while also underwriting its public securities offering. We find issuers, particularly noninvestment-grade issuers for whom informational economies of scope are likely to be large, benefit through lower underwriter fees and discounted loan yield spreads. Underwriters, both commercial banks, as well as investment banks, engage in concurrent lending and provide price discounts, albeit in different ways. We find concurrent lending helps underwriters build relationships, increasing the probability of receiving current and future business.

Suggested Citation

Drucker, Steven and Puri, Manju, On the Benefits of Concurrent Lending and Underwriting. Journal of Finance, 2004. Available at SSRN: https://ssrn.com/abstract=620784

Steven Drucker

Renaissance Technologies LLC - Meritage Group

800 Third Ave
New York, NY 10022
United States

Manju Puri (Contact Author)

Duke University - Fuqua School of Business ( email )

100 Fuqua Drive
Box 90120
Durham, NC 27708-0120
United States
919-660-7657 (Phone)

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

FDIC ( email )

550 17th Street NW
Washington, DC 20429
United States

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