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RFS Advance Access originally published online on February 17, 2006
Review of Financial Studies 2006 19(3):1041-1080; doi:10.1093/rfs/hhj023
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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.

Innovation, Differentiation, and the Choice of an Underwriter: Evidence from Equity-Linked Securities

Enrique Schroth
HEC-University of Lausanne and FAME

Address Correspondence to Enrique Schroth, Route de Chavannes 33, 1007 Lausanne, Switzerland, e-mail: enrique.schroth{at}unil.ch.

Investment banks imitate other bank’s innovative corporate securities and compete with the innovator to underwrite new issues. This article uses data of all the corporate offerings of equity-linked and derivative securities in the Securities Data Company (SDC) to estimate the issuer’s demand of underwriting services provided by investment banks across different varieties of securities. It finds that the demand for the innovator’s variety is larger than the imitators’. This demand advantage decreases with time and faster for securities that appear later in a sequence of innovations. Imitation becomes less attractive later in the sequence as information from earlier deals spills-over to all banks.


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