Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations

46 Pages Posted: 11 Nov 2008

See all articles by Alexander Ljungqvist

Alexander Ljungqvist

Centre for Economic Policy Research (CEPR); Swedish House of Finance; European Corporate Governance Institute (ECGI)

Felicia C. Marston

University of Virginia - McIntire School of Commerce

William J. Wilhelm

University of Virginia - McIntire School of Commerce

Multiple version iconThere are 6 versions of this paper

Date Written: July 2003

Abstract

We investigate directly whether analyst behavior influenced the likelihood of banks winning underwriting mandates for a sample of 16,456 U.S. debt and equity offerings sold between December 1993 and June 2002. We control for the strength of the issuer s investment-banking relationships with potential competitors for the mandate and for the endogeneity of analyst behavior and the bank s decision to provide analyst coverage. Contrary to recent allegations, we find no evidence that aggressive analyst recommendations or recommendation upgrades increased a bank s probability of winning an underwriting mandate once we control for analysts career concerns. In fact, the opposite appears to be the case. Nor do we find that banks competed successfully for equity deals on the basis of their ability to make low-cost corporate loans available. Only among debt deals sold since the deregulation of commercial banks is there evidence of aggressive recommendations helping banks to win underwriting mandates.

Keywords: Analyst behavior, Underwriting, Commercial banks, Glass-Steagall Act

Suggested Citation

Ljungqvist, Alexander and Ljungqvist, Alexander and Marston, Felicia C. and Wilhelm, William J., Competing for Securities Underwriting Mandates: Banking Relationships and Analyst Recommendations (July 2003). NYU Working Paper No. S-FI-03-04, Available at SSRN: https://ssrn.com/abstract=1297765

Alexander Ljungqvist (Contact Author)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Felicia C. Marston

University of Virginia - McIntire School of Commerce ( email )

P.O. Box 400173
Charlottesville, VA 22904-4173
United States
804-924-1417 (Phone)

William J. Wilhelm

University of Virginia - McIntire School of Commerce ( email )

Rouss & Robertson Halls, East Lawn
P.O. Box 400173
Charlottesville, VA 22904-4173
United States
434-924-7666 (Phone)
434-924-7074 (Fax)

HOME PAGE: http://gates.comm.virginia.edu/wjw9a/

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