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Bank underwriting of debt securities: modern evidence |
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| Authors: | Gande A; Puri M; Saunders A; Walter I |
| Institution: | 1 Vanderbilt University, USA 2 Stanford University, USA 3 Department of Finance, Stern School of Business, New York University, MEC 9-190, 44 West 4th Street, New York, NY 10012, USA z Corresponding author |
| Abstract: | This article examines debt securities underwritten by Section20 subsidiaries of bank holding companies relative to thoseunderwritten by investment houses. Consistent with a net certificationeffect for banks, bank underwriting of lower credit rated firmsto whom the bank lends results in relatively higher prices (loweryields). We find no evidence of conflicts of interest even whenan issue is used to repay bank debt. Further, banks bring arelatively larger proportion of small issues to the market.Contrary to the contention that universal banking stunts availabilityof finance to small firms, bank underwritings appear to benefitsmall firms. |
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