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Relationships And Underwriter Spreads In The Eurobond Floating Rate Note Market

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  • Michael G. Kollo
  • Ian G. Sharpe

Abstract

We examine the role of issuer‐underwriter relationships in determining underwriter spreads for Eurobond floating rate notes from 1992 to 2002. Financial and nonfinancial firms with long‐term relationships pay a higher underwriter spread. Financial issuers that switch underwriters receive a discounted spread that is invariant to the underwriter's reputation and quality of the issue. However, the discount is not evident for nonfinancial firms. For both financial and nonfinancial firms, spreads are higher for noninvestment grade issues and, within investment grade, increase as quality declines. We also find higher spreads when underwriting is syndicated, and a strong negative time trend consistent with increasing competitive pressures.

Suggested Citation

  • Michael G. Kollo & Ian G. Sharpe, 2006. "Relationships And Underwriter Spreads In The Eurobond Floating Rate Note Market," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 29(2), pages 163-180, June.
    • Handle: RePEc:bla:jfnres:v:29:y:2006:i:2:p:163-180
    DOI: 10.1111/j.1475-6803.2006.00172.x
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    Cited by:

    1. Jose A. Lopez & Mark M. Spiegel, 2006. "Foreign bank lending and bond underwriting in Japan during the lost decade," Working Paper Series 2006-45, Federal Reserve Bank of San Francisco.
    2. Carbó-Valverde, Santiago & Cuadros-Solas, Pedro J. & Rodríguez-Fernández, Francisco, 2017. "Do banks and industrial companies have equal access to reputable underwriters in debt markets?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 176-202.

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