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Bank underwriting of corporate bonds: Evidence from Japan after 1994

Yasushi Hamao; Takeo Hoshi

Title:
Bank underwriting of corporate bonds: Evidence from Japan after 1994
Author(s):
Hamao, Yasushi
Hoshi, Takeo
Date:
Type:
Working papers
Department:
Center on Japanese Economy and Business
Permanent URL:
Series:
Center on Japanese Economy and Business Working Papers
Part Number:
135
Publisher:
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Publisher Location:
New York
Abstract:
This paper examines a recent major change in the corporate bond primary market in Japan, namely bond underwriting by bank subsidiary securities firms. We analyze yields on corporate bonds at the time of issue, searching for evidence of conflict of interest, bank certification, distribution advantage, or aggressive entry strategy by banks. Bank subsidiaries have been successful in acquiring the underwriting business of firms which have been reducing their ties with main banks through decreasing loans, rather than serving firms for which the parent banks are the main banks. This tendency is especially clear in the more recent period. After controlling for firm and bond characteristics, the choice of underwriter (existing or bank subsidiary securities firms) generally does not have a material impact on yield spread. On the other hand, when the choice of underwriters is interacted with the maturities of corporate bonds, there is some evidence of net certification effect and/or aggressive pricing for bonds with longer maturities, which would have less competition with bank loans.
Subject(s):
Economics, Commerce-Business
Item views:
204
Metadata:
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