Underwriter switching in the Japanese corporate bond market

C. R. McKenzie, Sumiko Takaoka

Research output: Chapter in Book/Report/Conference proceedingConference contribution

Abstract

The purpose of this paper is to examine the determinants of firms switching the lead underwriter they use to underwrite their first and second public issues of corporate bonds in Japan between 1994 and 2002. A probit model which has as its dependent variable a 0-1 dummy variable taking the value one if the issuer switches lead underwriters, and zero otherwise, is used to analyze this problem. It is found that the probability of switch of underwriters between the first and second issues is significantly increased if the securities company subsidiary of a bank was the initial underwriter or the reputation of the underwriter of the initial underwriter worsens between the initial and the second issue. Evidence is also presented that suggests underwriters who can increase the degree of overpricing of the initial issue are more likely to be chosen to act as the underwriter of the second issue. Despite the theoretical suggestions that underwriting involves investment in durable firm-specific assets which might lead to initial issuers having an inside edge in being chosen to underwriter the second evidence, there is some weak evidence to suggest that switching of underwriters occurs when second issues are made relatively quickly after the first issue.

Original languageEnglish
Title of host publicationMODSIM 2005 - International Congress on Modelling and Simulation
Subtitle of host publicationAdvances and Applications for Management and Decision Making, Proceedings
EditorsAndre Zerger, Robert M. Argent
PublisherModelling and Simulation Society of Australia and New Zealand Inc. (MSSANZ)
Pages580-586
Number of pages7
ISBN (Electronic)0975840029, 9780975840023
Publication statusPublished - 2020 Jan 1
Event2005 International Congress on Modelling and Simulation: Advances and Applications for Management and Decision Making, MODSIM 2005 - Melbourne, Australia
Duration: 2005 Dec 122005 Dec 15

Publication series

NameMODSIM 2005 - International Congress on Modelling and Simulation: Advances and Applications for Management and Decision Making, Proceedings

Conference

Conference2005 International Congress on Modelling and Simulation: Advances and Applications for Management and Decision Making, MODSIM 2005
CountryAustralia
CityMelbourne
Period05/12/1205/12/15

Keywords

  • Corporate bonds
  • Mispricing
  • Reputation
  • Switching
  • Underwriting

ASJC Scopus subject areas

  • Modelling and Simulation

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  • Cite this

    McKenzie, C. R., & Takaoka, S. (2020). Underwriter switching in the Japanese corporate bond market. In A. Zerger, & R. M. Argent (Eds.), MODSIM 2005 - International Congress on Modelling and Simulation: Advances and Applications for Management and Decision Making, Proceedings (pp. 580-586). (MODSIM 2005 - International Congress on Modelling and Simulation: Advances and Applications for Management and Decision Making, Proceedings). Modelling and Simulation Society of Australia and New Zealand Inc. (MSSANZ).