Advanced Search
MyIDEAS: Login to save this paper or follow this series

Underwriter competition and gross spreads in the eurobond market

Contents:

Author Info

  • Kollo, Michael G.
Registered author(s):

    Abstract

    We investigate the competitive landscape of underwriting services in the Eurobond market including the choice of underwriter and underwriter gross spread. We find a significant but declining association between the home market of the Eurobond’s currency of denomination and that of the lead underwriter. These bonds underwritten by underwriters ‘local’ to the currency also carry significantly lower underwriter gross spreads vis-à-vis other Eurobonds. The amalgamation of the European currencies into the Euro resulted in a significant shift in the competitive landscape for underwriting services. We find a significant portion of market shares shifted from the ‘local’ European underwriters to non-‘local’ U.S. underwriters with the introduction of the Euro. Moreover, the volume of new issues rose and the gross underwriter spread declined significantly. Our empirical results suggest that Eurozone underwriters responded to the increased entry of U.S. and other Eurozone underwriter with aggressive discounting of the underwriter gross spread. JEL Classification: G15, G24

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp550.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by European Central Bank in its series Working Paper Series with number 0550.

    as in new window
    Length:
    Date of creation: Nov 2005
    Date of revision:
    Handle: RePEc:ecb:ecbwps:20050550

    Contact details of provider:
    Postal: Postfach 16 03 19, Frankfurt am Main, Germany
    Phone: +49 69 1344 0
    Fax: +49 69 1344 6000
    Web page: http://www.ecb.europa.eu/home/html/index.en.html
    More information through EDIRC

    Order Information:
    Postal: Press and Information Division, European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany
    Email:

    Related research

    Keywords: Eurobond market; Underwriter competition; Underwriter spreads;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
    as in new window
    1. Gabriele Galati & Kostas Tsatsaronis, 2001. "The impact of the euro on Europe's financial markets," BIS Working Papers 100, Bank for International Settlements.
    2. Steven Drucker & Manju Puri, 2004. "The Tying of Lending and Equity Underwriting," NBER Working Papers 10491, National Bureau of Economic Research, Inc.
    3. Carsten Detken & Philipp Hartmann, 2000. "The Euro and International Capital Markets," EUI-RSCAS Working Papers 27, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
    4. Detken, Carsten & Hartmann, Philipp, 2000. "The euro and international capital markets," CFS Working Paper Series 2000/09, Center for Financial Studies (CFS).
    5. Arie Melnik & Doron Nissim, 2003. "Debt issue costs and issue characteristics in the Eurobond market," ICER Working Papers 09-2003, ICER - International Centre for Economic Research.
    6. Megginson, William L & Weiss, Kathleen A, 1991. " Venture Capitalist Certification in Initial Public Offerings," Journal of Finance, American Finance Association, vol. 46(3), pages 879-903, July.
    7. Roden, Peyton Foster & Bassler, John, 1996. "Effect of Underwriter Prestige on the Interest Cost of Municipal Bond Offerings," The Financial Review, Eastern Finance Association, vol. 31(3), pages 641-66, August.
    8. Jean Dermine, 1996. "European Banking with a Single Currency," Center for Financial Institutions Working Papers 96-54, Wharton School Center for Financial Institutions, University of Pennsylvania.
    9. Krigman, Laurie & Shaw, Wayne H. & Womack, Kent L., 2001. "Why do firms switch underwriters?," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 245-284, May.
    10. Neil Esho & Michael G. Kollo & Ian G. Sharpe, 2004. "Eurobond underwriter spreads," LSE Research Online Documents on Economics 24744, London School of Economics and Political Science, LSE Library.
    11. Altinkilic, Oya & Hansen, Robert S, 2000. "Are There Economies of Scale in Underwriting Fees? Evidence of Rising External Financing Costs," Review of Financial Studies, Society for Financial Studies, vol. 13(1), pages 191-218.
    12. Chemmanur, Thomas J & Fulghieri, Paolo, 1994. " Investment Bank Reputation, Information Production, and Financial Intermediation," Journal of Finance, American Finance Association, vol. 49(1), pages 57-79, March.
    13. Robert N. McCauley & William R. White, 1997. "The Euro and European financial markets," BIS Working Papers 41, Bank for International Settlements.
    14. João A. C. Santos & Kostas Tsatsaronis, 2003. "The cost of barriers to entry: evidence from the market for corporate euro bond underwriting," BIS Working Papers 134, Bank for International Settlements.
    15. Puri, Manju, 1999. "Commercial banks as underwriters: implications for the going public process," Journal of Financial Economics, Elsevier, vol. 54(2), pages 133-163, October.
    16. Gande, Amar, et al, 1997. "Bank Underwriting of Debt Securities: Modern Evidence," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 1175-1202.
    17. Robert N McCauley, 1999. "The Euro and the Liquidity of European Fixed Income Markets," CGFS Papers chapters, in: Bank for International Settlements (ed.), Market Liquidity: Research Findings and Selected Policy Implications, volume 11, pages 1-26 Bank for International Settlements.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    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.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ecb:ecbwps:20050550. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Official Publications).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.