Eurobond Underwriter Spreads

25 Pages Posted: 8 May 2006

See all articles by Neil Esho

Neil Esho

Australian Prudential Regulation Authority

Michael Gabor Kollo

London School of Economics & Political Science (LSE) - Financial Markets Group

Ian G. Sharpe

Australian Prudential Regulation Authority; UNSW Australia Business School, School of Banking and Finance; Financial Research Network (FIRN)

Abstract

We examine the determinants of underwriter spreads on straight/fixed rate Eurobonds issued by US firms between 1990 and 1998. We find that underwriter spreads are influenced by: (i) the governing law as it influences the timely and orderly renegotiation of contract terms, with bonds governed by English law having significantly lower spreads; (ii) the distribution mechanism, with spreads higher on public issues than private placements; (iii) underwriter reputation, with more reputable underwriters charging higher spreads; and (iv) the choice of currency, with spreads higher in the less frequently used currencies and/or in currencies where underwriting activities are more concentrated.

Suggested Citation

Esho, Neil and Kollo, Michael Gabor and Sharpe, Ian G., Eurobond Underwriter Spreads. Accounting and Finance, Vol. 46, No. 1, pp. 71-95, March 2006, Available at SSRN: https://ssrn.com/abstract=889787 or http://dx.doi.org/10.1111/j.1467-629X.2006.00162.x

Neil Esho (Contact Author)

Australian Prudential Regulation Authority ( email )

Level 26, 400 George Street
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Michael Gabor Kollo

London School of Economics & Political Science (LSE) - Financial Markets Group ( email )

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London WC2A 2AE
United Kingdom

Ian G. Sharpe

Australian Prudential Regulation Authority ( email )

Level 26, 400 George Street
Sydney, NSW 2000
Australia
612 92103638 (Phone)

UNSW Australia Business School, School of Banking and Finance ( email )

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Australia
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Financial Research Network (FIRN)

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Queensland
Australia

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