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Competition and Coalition among Underwriters: The Decision to Join a Syndicate

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  • WEI-LING SONG

Abstract

This paper studies the decision of lead investment banks to organize hybrid syndicates (commercial banks participating as co-managers) versus pure investment bank syndicates. The findings show that hybrid underwriting issues are more challenging to float. Compared to pure investment bank syndicates, hybrid syndicates serve clients that are smaller, have lower common stock rankings and less prior access to the capital markets, rely more on bank loans, and invest less capital but issue larger amounts, which indicates that commercial banks' participation enhances hybrid services. Moreover, lead investment banks tend to invite banks' participation when clients exhibit higher loyalty in reusing their services. Copyright 2004 by The American Finance Association.

Suggested Citation

  • Wei-Ling Song, 2004. "Competition and Coalition among Underwriters: The Decision to Join a Syndicate," Journal of Finance, American Finance Association, vol. 59(5), pages 2421-2444, October.
  • Handle: RePEc:bla:jfinan:v:59:y:2004:i:5:p:2421-2444
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    Citations

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    Cited by:

    1. Bourjade, Sylvain, 2002. "Diversification of Investor's Expertise in IPOs," MPRA Paper 7259, University Library of Munich, Germany, revised Dec 2007.
    2. Chaplinsky, Susan & Erwin, Gayle R., 2009. "Great expectations: Banks as equity underwriters," Journal of Banking & Finance, Elsevier, vol. 33(2), pages 380-389, February.
    3. Boone, Audra L. & Mulherin, J. Harold, 2011. "Do private equity consortiums facilitate collusion in takeover bidding?," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1475-1495.
    4. Shivdasani, Anil & Song, Wei-Ling, 2011. "Breaking down the barriers: Competition, syndicate structure, and underwriting incentives," Journal of Financial Economics, Elsevier, vol. 99(3), pages 581-600, March.
    5. Macias, Antonio J. & Moeller, Thomas, 2016. "Target signaling with material adverse change clauses in merger agreements," Journal of Empirical Finance, Elsevier, vol. 39(PA), pages 69-92.
    6. repec:eee:moneco:v:90:y:2017:i:c:p:158-175 is not listed on IDEAS
    7. Knaup, M., 2011. "Market-based measures of bank risk and bank aggressiveness," Other publications TiSEM cff93cd4-1955-40ab-a3c0-a, Tilburg University, School of Economics and Management.
    8. Marie-Hélène Broihanne & Christophe Godlewski, 2014. "Building reputation on the syndicated lending market: A participant bank perspective," Working Papers of LaRGE Research Center 2014-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    9. repec:eee:corfin:v:45:y:2017:i:c:p:176-202 is not listed on IDEAS
    10. Tykvová, Tereza & Schertler, Andrea, 2014. "Does Syndication With Local Venture Capitalists Moderate the Effects of Geographical and Institutional Distance?," Journal of International Management, Elsevier, vol. 20(4), pages 406-420.
    11. Caselli, Stefano & Garcia-Appendini, Emilia & Ippolito, Filippo, 2013. "Contracts and returns in private equity investments," Journal of Financial Intermediation, Elsevier, vol. 22(2), pages 201-217.
    12. Jeon, Jin Q. & Ligon, James A., 2011. "The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1041-1056, May.
    13. Contreras, Gaby & Bos, Jaap & Kleimeier, Stefanie, 2018. "Link About It: Information Asymmetry, Knowledge Pooling and Syndication in Project Finance Lending," Research Memorandum 008, Maastricht University, Graduate School of Business and Economics (GSBE).
    14. repec:oup:revfin:v:21:y:2017:i:1:p:299-326. is not listed on IDEAS
    15. Jian Cai, 2009. "Competition or collaboration? The reciprocity effect in loan syndication," Working Paper 0909, Federal Reserve Bank of Cleveland, revised 01 Apr 2010.
    16. Christophe J. Godlewski, 2008. "What Drives the Arrangement Timetable of Bank Loan Syndication ?," Working Papers of LaRGE Research Center 2008-02, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    17. Manthos D. Delis & Sotirios Kokas & Steven Ongena, 2017. "Bank Market Power and Firm Performance," Review of Finance, European Finance Association, vol. 21(1), pages 299-326.
    18. Matthew D. Cain & David J. Denis, 2013. "Information Production by Investment Banks: Evidence from Fairness Opinions," Journal of Law and Economics, University of Chicago Press, vol. 56(1), pages 245-280.
    19. Shivdasani, Anil & Song, Wei-Ling, 2010. "Breaking Down the Barriers: Competition, Syndicate Structure, and Underwriting Incentives," Working Papers 10-25, University of Pennsylvania, Wharton School, Weiss Center.

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