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The impact of bank entry in the Japanese corporate bond underwriting market |
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| Institution: | 1. University of Melbourne, Australia;2. University of Toronto, Canada;3. University of Michigan, Michigan;3. University of St.Gallen, Singapore & Switzerland;1. Department of Finance, Wisconsin School of Business, UW-Madison, 5274E Grainger Hall, 975 University Avenue, Madison, WI 53703, USA;2. Department of Economics, Columbia University, 1022 International Affairs Building, Mail Code 3308, 420 West 118th Street, NY, NY 10027, USA |
| Abstract: | The 1993 Japanese financial system reform allowed banks to enter the underwriting market for corporate bonds through bank-owned security subsidiaries. This paper examines empirically whether underwriting commissions and yield spreads on corporate straight bonds issued domestically fell as a result of this bank entry. The empirical results show that bank entry significantly lowers both underwriting commissions and yield spreads. Commissions charged by banks are significantly lower than those charged by investment houses. Lending and shareholding relationships between the issuer and underwriter are not important in determining commissions or yield spreads. |
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