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RFS Advance Access published online on July 1, 2006
Review of Financial Studies, doi:10.1093/rfs/hhl016
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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

Article

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

Rajesh P. Narayanan 1 *, Kasturi P. Rangan 2, and Nanda K. Rangan 3
1 Ohio University, Department of Finance, 230 Copeland Hall, Athens, OH 45701
2 Booz Allen Hamilton
3 Ohio University

* To whom correspondence should be addressed.
Rajesh P. Narayanan, E-mail: narayana{at}ohio.edu


  Abstract

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. Further, 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.


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