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RFS Advance Access originally published online on July 1, 2006
Review of Financial Studies 2007 20(3):597-618; doi:10.1093/rfs/hhl016
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Right arrow G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
Right arrow G28 - Government Policy and Regulation
Right arrow G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure
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© The Author 2006. Published by Oxford University Press on behalf of The Society for Financial Studies. All rights reserved. For permissions, please email: journals.permissions@oxfordjournals.org.

The Effect of Private-Debt-Underwriting Reputation on Bank Public-Debt Underwriting

Rajesh P. Narayanan
Ohio University

Kasturi P. Rangan
Booz Allen Hamilton

Nanda K. Rangan
Ohio University

Address correspondence to Rajesh P. Narayanan, Department of Finance, Ohio University, 230 Copeland Hall, Athens, OH 45701, or e-mail: narayana{at}ohio.edu.

We provide evidence that commercial banks extend their reputation in underwriting syndicated loans and private placements (private debt) to their bond-underwriting activities. In the absence of bond market reputation, private-debt-market reputation enables commercial banks to win underwriting mandates from their loan clients. Furthermore, it allows them to credibly commit to investors against opportunistically using lending information and thereby deliver superior certification benefits in the form of higher issue prices relative to investment-bank underwriters. This pricing benefit is not offset by higher underwriting fees and thus results in lower total issuance costs for borrowers.(JEL G21, G28, L14, L15)


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