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Does proximity matter in international bond underwriting?

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  • Lau, Sie Ting
  • Yu, Jing

Abstract

In this study, we analyze a sample of 3982 international bond issues from 31 countries to examine the impact of geographic proximity on the selection of lead underwriter in the international bond market. We find that proximate banks are more likely to lead underwrite risky bonds and non-rated bonds. On average, the total issue cost is lower if the lead underwriter is a proximate bank. The overall results suggest that geographically proximate banks have better access to private information about issuing companies. We also find that the cost reduction effect of proximate underwriting only appears in developed markets. In addition, this cost reduction effect is relatively weak in countries with a legal system that provides good investor protection.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Banking & Finance.

Volume (Year): 34 (2010)
Issue (Month): 9 (September)
Pages: 2027-2041

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Handle: RePEc:eee:jbfina:v:34:y:2010:i:9:p:2027-2041

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Web page: http://www.elsevier.com/locate/jbf

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Keywords: Geographic proximity International bond Underwriting;

References

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Cited by:
  1. Moore, Michael J. & Payne, Richard, 2011. "On the sources of private information in FX markets," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1250-1262, May.

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