TY - JOUR

T1 - Do bank bailouts have an impact on the underwriting business?

AU - Carbo-Valverde, Santiago

AU - Cuadros Solas, Pedro

AU - Rodriguez Fernandez, Francisco

N1 - 18 months embargo

PY - 2020/8/31

Y1 - 2020/8/31

N2 - We explore the effects of bank bailouts on competition in the underwriting business. We exploit a sample of underwriters active in the European corporate bond markets from 2006–2013 and find that reputable underwriters suffer market share losses (of 12.43%) after being bailed out. However, the market share of non-reputable underwriters is found to increase after a bail out. An exploration of the firm–bank underwriting matching reveals that the probability of being chosen as underwriter in a given deal decreases for reputable bailed-out banks, while it increases for non-reputable bailed-out banks. These results provide evidence of the effects of bailouts on underwriting competition. The economic impact depends on the ex-ante reputational capital of the bailed-out bank.

AB - We explore the effects of bank bailouts on competition in the underwriting business. We exploit a sample of underwriters active in the European corporate bond markets from 2006–2013 and find that reputable underwriters suffer market share losses (of 12.43%) after being bailed out. However, the market share of non-reputable underwriters is found to increase after a bail out. An exploration of the firm–bank underwriting matching reveals that the probability of being chosen as underwriter in a given deal decreases for reputable bailed-out banks, while it increases for non-reputable bailed-out banks. These results provide evidence of the effects of bailouts on underwriting competition. The economic impact depends on the ex-ante reputational capital of the bailed-out bank.

U2 - 10.1016/j.jfs.2020.100756

DO - 10.1016/j.jfs.2020.100756

M3 - Article

VL - 49

JO - Journal of Financial Stability

JF - Journal of Financial Stability

SN - 1572-3089

M1 - 100756

ER -