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Bank entry, competition, and the market for corporate securities underwriting

Authors
Journal
Journal of Financial Economics
0304-405X
Publisher
Elsevier
Publication Date
Volume
54
Issue
2
Identifiers
DOI: 10.1016/s0304-405x(99)00035-5
Keywords
  • Commercial Banks
  • Underwriters
  • Certification
  • Spreads
  • Yields
  • Glass–Steagall

Abstract

Abstract This paper examines the competitive effects of commercial bank entry into the corporate debt underwriting market, particularly with respect to underwriter spreads, ex-ante yields, and market concentration. We find that underwriter spreads and ex-ante yields have declined significantly with bank entry, consistent with the market becoming more competitive. This effect is strongest among the lower-rated and smaller debt issues of which banks have underwritten a relatively greater share. The early evidence also indicates that bank entry has tended to decrease market concentration. Overall, our results suggest that bank entry has had a pro-competitive effect.

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