Main bank relationships and underwriter choice

Sumiko Takaoka, Colin R Mckenzie

Research output: Contribution to journalArticle

1 Citation (Scopus)

Abstract

We examine why independent securities companies and bank subsidiary securities companies can coexist as underwriters in the Japanese corporate bond market in a period when the main bank system is very important in the Japanese financial system. While it has already been found that lending and shareholding relationships between main banks and issuers are not important determinants of underwriting commissions or yield spreads, they are found to be important determinants of lead underwriter choices. The findings about the impact of main bank relationships on underwriter choices suggest that an issuer with a strong main bank shareholding relationship chooses the main bank subsidiary securities company as the lead underwriter, and is unlikely to choose an independent securities company. An issuer with a larger sized bond issue tends to choose an independent securities company as the lead underwriter for its marketing ability. The findings from four different models consistently support the idea that independent securities companies have an advantage in marketing ability, and the main bank subsidiary securities company has an advantage in the information generated through the main bank relationship.

Original languageEnglish
Pages (from-to)413-423
Number of pages11
JournalApplied Financial Economics
Volume24
Issue number6
DOIs
Publication statusPublished - 2014

Fingerprint

Underwriters
Main bank
Bank relationships
Subsidiaries
Shareholding
Marketing
Financial system
Bond market
Yield spread
Lending
Corporate bonds
Underwriting

Keywords

  • main bank
  • main bank-firm relationships
  • underwriter choice
  • volatility

ASJC Scopus subject areas

  • Economics and Econometrics
  • Finance

Cite this

Main bank relationships and underwriter choice. / Takaoka, Sumiko; Mckenzie, Colin R.

In: Applied Financial Economics, Vol. 24, No. 6, 2014, p. 413-423.

Research output: Contribution to journalArticle

Takaoka, Sumiko ; Mckenzie, Colin R. / Main bank relationships and underwriter choice. In: Applied Financial Economics. 2014 ; Vol. 24, No. 6. pp. 413-423.
@article{238b63c6eda74b47bb54f81d7bae4d4b,
title = "Main bank relationships and underwriter choice",
abstract = "We examine why independent securities companies and bank subsidiary securities companies can coexist as underwriters in the Japanese corporate bond market in a period when the main bank system is very important in the Japanese financial system. While it has already been found that lending and shareholding relationships between main banks and issuers are not important determinants of underwriting commissions or yield spreads, they are found to be important determinants of lead underwriter choices. The findings about the impact of main bank relationships on underwriter choices suggest that an issuer with a strong main bank shareholding relationship chooses the main bank subsidiary securities company as the lead underwriter, and is unlikely to choose an independent securities company. An issuer with a larger sized bond issue tends to choose an independent securities company as the lead underwriter for its marketing ability. The findings from four different models consistently support the idea that independent securities companies have an advantage in marketing ability, and the main bank subsidiary securities company has an advantage in the information generated through the main bank relationship.",
keywords = "main bank, main bank-firm relationships, underwriter choice, volatility",
author = "Sumiko Takaoka and Mckenzie, {Colin R}",
year = "2014",
doi = "10.1080/09603107.2014.881969",
language = "English",
volume = "24",
pages = "413--423",
journal = "Applied Economics",
issn = "0003-6846",
publisher = "Routledge",
number = "6",

}

TY - JOUR

T1 - Main bank relationships and underwriter choice

AU - Takaoka, Sumiko

AU - Mckenzie, Colin R

PY - 2014

Y1 - 2014

N2 - We examine why independent securities companies and bank subsidiary securities companies can coexist as underwriters in the Japanese corporate bond market in a period when the main bank system is very important in the Japanese financial system. While it has already been found that lending and shareholding relationships between main banks and issuers are not important determinants of underwriting commissions or yield spreads, they are found to be important determinants of lead underwriter choices. The findings about the impact of main bank relationships on underwriter choices suggest that an issuer with a strong main bank shareholding relationship chooses the main bank subsidiary securities company as the lead underwriter, and is unlikely to choose an independent securities company. An issuer with a larger sized bond issue tends to choose an independent securities company as the lead underwriter for its marketing ability. The findings from four different models consistently support the idea that independent securities companies have an advantage in marketing ability, and the main bank subsidiary securities company has an advantage in the information generated through the main bank relationship.

AB - We examine why independent securities companies and bank subsidiary securities companies can coexist as underwriters in the Japanese corporate bond market in a period when the main bank system is very important in the Japanese financial system. While it has already been found that lending and shareholding relationships between main banks and issuers are not important determinants of underwriting commissions or yield spreads, they are found to be important determinants of lead underwriter choices. The findings about the impact of main bank relationships on underwriter choices suggest that an issuer with a strong main bank shareholding relationship chooses the main bank subsidiary securities company as the lead underwriter, and is unlikely to choose an independent securities company. An issuer with a larger sized bond issue tends to choose an independent securities company as the lead underwriter for its marketing ability. The findings from four different models consistently support the idea that independent securities companies have an advantage in marketing ability, and the main bank subsidiary securities company has an advantage in the information generated through the main bank relationship.

KW - main bank

KW - main bank-firm relationships

KW - underwriter choice

KW - volatility

UR - http://www.scopus.com/inward/record.url?scp=84895541132&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84895541132&partnerID=8YFLogxK

U2 - 10.1080/09603107.2014.881969

DO - 10.1080/09603107.2014.881969

M3 - Article

AN - SCOPUS:84895541132

VL - 24

SP - 413

EP - 423

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

IS - 6

ER -