The Effect of Private-Debt Underwriting Reputation on Bank Public-Debt Underwriting

Posted: 12 Aug 2006

See all articles by Rajesh Narayanan

Rajesh Narayanan

Louisiana State University

Kasturi P. Rangan

Case Western Reserve University - Department of Banking & Finance

Nanda K. Rangan

Virginia Commonwealth University

Abstract

We provide evidence that commercial banks extend their reputation in underwriting syndicated loans and private placements (private debt) to their bond underwriting activities. In the absence of bond-market reputation, private-debt-market reputation enables commercial banks to win underwriting mandates from their loan clients. Further, it allows them to credibly commit to investors against opportunistically using lending information and thereby deliver superior certification benefits in the form of higher issue prices relative to investment-bank underwriters. This pricing benefit is not offset by higher underwriting fees, and thus results in lower total issuance costs for borrowers.

Keywords: Underwriting, Certification, Reputation extension

JEL Classification: G21, G24, L51

Suggested Citation

Narayanan, Rajesh and Rangan, Kasturi P. and Rangan, Nanda K., The Effect of Private-Debt Underwriting Reputation on Bank Public-Debt Underwriting. Review of Financial Studies, Forthcoming, Available at SSRN: https://ssrn.com/abstract=923844

Rajesh Narayanan (Contact Author)

Louisiana State University ( email )

Baton Rouge, LA 70803-6308
United States
225-578-6236 (Phone)

Kasturi P. Rangan

Case Western Reserve University - Department of Banking & Finance ( email )

10900 Euclid Ave.
Cleveland, OH 44106-7235
United States
216-368-3688 (Phone)
216-368-4776 (Fax)

Nanda K. Rangan

Virginia Commonwealth University ( email )

2400 East Cary Street, Suite # 400
Richmond, VA 23223
United States
8048277410 (Phone)

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