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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
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    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. 2006 The Southern Finance Association and the Southwestern Finance Association.

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    Bibliographic Info

    Article provided by Southern Finance Association & Southwestern Finance Association in its journal Journal of Financial Research.

    Volume (Year): 29 (2006)
    Issue (Month): 2 ()
    Pages: 163-180

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    Handle: RePEc:bla:jfnres:v:29:y:2006:i:2:p:163-180

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    Web page: http://www.blackwellpublishing.com/journal.asp?ref=0270-2592
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    Web page: http://www.southwesternfinance.org/
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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.

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