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On the Benefits of Concurrent Lending and Underwriting

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  • STEVEN DRUCKER
  • MANJU PURI

Abstract

This paper examines whether there are efficiencies that benefit issuers and underwriters when a financial intermediary concurrently lends to an issuer while also underwriting its public securities offering. We find issuers, particularly noninvestment‐grade issuers for whom informational economies of scope are likely to be large, benefit through lower underwriter fees and discounted loan yield spreads. Underwriters, both commercial banks as well as investment banks, engage in concurrent lending and provide price discounts, albeit in different ways. We find concurrent lending helps underwriters build relationships, increasing the probability of receiving current and future business.

Suggested Citation

  • Steven Drucker & Manju Puri, 2005. "On the Benefits of Concurrent Lending and Underwriting," Journal of Finance, American Finance Association, vol. 60(6), pages 2763-2799, December.
    • Handle: RePEc:bla:jfinan:v:60:y:2005:i:6:p:2763-2799
    DOI: 10.1111/j.1540-6261.2005.00816.x
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