The market structure effects of commercial bank entry into underwriting: Evidence from the league tables

This study investigates the market structure effects of the deregulation of the US underwriting industry that allowed commercial banks to expand into investment banking activities. Specifically, it analyses the gains of commercial banks in market rankings and market share, the market position of the traditional top-ranked firms and changes in market concentration. The overall evidence suggests that (a) commercial banks were successful in gaining market share in underwriting, especially in debt offerings; (b) the commercial bank entry into underwriting eroded the dominance of bulge-bracket firms in debt underwriting, but not in equity offerings, where their dominance intensified; and (c) the commercial bank entry helped reduce market concentration in debt but not in equity underwriting. Finally, the study finds that the market share of commercial banks in equity offerings increases when equity underwriting volume rises, whereas market concentration in debt offerings increases when debt underwriting volume falls.