Underwriter reputation and the pricing of securities: Evidence from asset-backed securities |
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| Affiliation: | 1. School of Mathematics and Finance, Anhui Polytechnic University, Wuhu, China;2. Antai College of Economics and Management, Shanghai Jiao Tong University, Shanghai, China;3. Data-Driven Management Decision Making Lab, Shanghai Jiao Tong University, Shanghai, China;1. Department of Digital Economy, Shanghai University of Finance and Economics, No 777 Guoding Road, Shanghai 200433, China;2. School of Information Management & Engineering, Shanghai University of Finance and Economics, No 777 Guoding Road, Shanghai 200433, China;3. Faculty of Business information, Shanghai Business School, No 123 Fengpu Avenue, Shanghai 201400, China;1. College of Finance, Nanjing Agricultural University, Nanjing 210095, China;2. School of Advanced Agricultural Sciences, Peking University, Beijing 100871, China;3. Business School, Hohai University, Nanjing 211100, China;1. Center for Quantitative Economics of Jilin University, Changchun 130012, PR China;2. Business and Management School of Jilin University, Changchun 130012, PR China;3. Economics School of Changchun University, Changchun 130021, PR China;1. SKEMA Business School – Université Côte d''Azur, France;2. Rennes School of Business, Rennes, France;3. DCU Business School, Dublin City University, Dublin, Ireland;4. IESEG School of Management, UMR 9221 - LEM - Lille Économie Management, F-59000 Lille, France;5. Univ. Lille, UMR 9221 - LEM - Lille Économie Management, F-59000 Lille, France;6. CNRS, UMR 9221 - LEM - Lille Économie Management, F-59000 Lille, France |
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| Abstract: | This paper investigates whether and how the underwriter reputation can affect the pricing of securities. Using data on collateralized loan obligations (CLO), asset-backed securities (ABS), and asset-backed medium-term notes (ABN) from 2014 to 2019 in China bond market, we find that the underwriter's reputation has a significantly negative impact on the issuance spread. This effect is more pronounced in the CLO and ABS markets, while that in the ABN market is not significant. Furthermore, we find that the originators play a critical role in determining the issuance spread of securities, as state-owned and listed originator receive a lower initial yield spread. In addition, the number of tranches and the proportion of subordination in a deal also have a stronger effect on the relation between which the underwriters' reputation and securities prices. These results suggest that underwriters play a role in reducing information asymmetry between originators and investors, which is partly corrected via underwriter reputation. |
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| Keywords: | Originator characteristics |
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