#03-20
"Competition and Coalition Among Underwriters: The Decision to Join a Syndicate"
Abstract: This paper tests a strategic syndication hypothesis that bond underwriters with different comparative advantages cooperate strategically to meet certain clients' demands by organizing hybrid syndicates (commercial banks participate as co-managers in investment bank lead 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 ranking and less prior access to the capital markets, rely more on bank loans, invest less capital, but issue larger amounts, which indicates commercial banks' participation enhances Hybrid services. Moreover, lead investment banks tend to invite banks' participation when clients exhibit higher loyalty in reusing their services.
JEL Classification: G24; G28; L11; L13
Key Words: Glass-Steagall; Underwriting; Coalition; Net yields; Syndication
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