TY - JOUR
T1 - Underwriter reputation and switching
AU - McKenzie, C. R.
AU - Takaoka, Sumiko
N1 - Funding Information:
The authors gratefully acknowledge the financial assistance provided by a Japanese Ministry of Education, Culture, Sports, Science and Technology Grant-in-Aid (#17330074) for a Project on ‘Price Formation in the Bond and Stock Markets, and Monetary Policy’.
PY - 2008/7
Y1 - 2008/7
N2 - 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 straight corporate bonds in Japan between 1994 and 2002. In particular, the paper focuses on the role of the lead underwriter's reputation in determining the degree of switching of underwriters between the first and second issues. As measures of an underwriter's reputation, the lead underwriter's rating at the time of the initial issue, the changes in the underwriter's ratings and market shares between the initial and second issue, and the degree of mispricing of the first issue are used. It is found that the probability of a switch of lead underwriters between the first and second issues is significantly increased if the securities company subsidiary of a bank was the initial lead underwriter, or the rating of the lead underwriter of the initial issue falls. There is some evidence to suggest that lead underwriters who can increase the degree of overpricing of the initial issue are more likely to be chosen to act as the lead underwriter of the second issue.
AB - 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 straight corporate bonds in Japan between 1994 and 2002. In particular, the paper focuses on the role of the lead underwriter's reputation in determining the degree of switching of underwriters between the first and second issues. As measures of an underwriter's reputation, the lead underwriter's rating at the time of the initial issue, the changes in the underwriter's ratings and market shares between the initial and second issue, and the degree of mispricing of the first issue are used. It is found that the probability of a switch of lead underwriters between the first and second issues is significantly increased if the securities company subsidiary of a bank was the initial lead underwriter, or the rating of the lead underwriter of the initial issue falls. There is some evidence to suggest that lead underwriters who can increase the degree of overpricing of the initial issue are more likely to be chosen to act as the lead underwriter of the second issue.
KW - Mispricing
KW - Reputation
KW - Straight corporate bonds
KW - Switching
KW - Underwriting
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U2 - 10.1016/j.matcom.2008.01.036
DO - 10.1016/j.matcom.2008.01.036
M3 - Article
AN - SCOPUS:43449137848
SN - 0378-4754
VL - 78
SP - 215
EP - 222
JO - Mathematics and Computers in Simulation
JF - Mathematics and Computers in Simulation
IS - 2-3
ER -