Bank Relationships and Underwriter Competition: Evidence from Japan

54 Pages Posted: 7 Nov 2005

See all articles by Ayako Yasuda

Ayako Yasuda

University of California, Davis - Graduate School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: March 15, 2006

Abstract

This paper examines the effects of bank relationships on underwriter choice in the Japanese corporate-bond market following the 1993 deregulation. Bank relationships have significant positive effects on a firm's underwriter choice. Relationship firms receive a small but significant fee discount and, consistent with mitigating effect of bank competition on holdup cost, multiple-relationship firms receive a significantly deeper discount than solo-relationship firms. Bank shareholding alone negatively affects underwriter choice, whereas shareholding together with loans have significantly more positive effects than loans alone. Finally, existing relationships reduce a Japanese firm's switching probability by 32%, in contrast to only 6% for U.S. firms.

Keywords: Bank Relationships, Bank Equity Holdings, Investment Banking, Universal Banking, Bank Competition, Underwriting Market, Comparing Financial Systems

JEL Classification: G1, G2, G3, L1, L5

Suggested Citation

Yasuda, Ayako, Bank Relationships and Underwriter Competition: Evidence from Japan (March 15, 2006). Available at SSRN: https://ssrn.com/abstract=836665 or http://dx.doi.org/10.2139/ssrn.836665

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University of California, Davis - Graduate School of Management ( email )

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