Mergers Among Debt Underwriters

Abstract

This paper examines the impact of two large mergers of underwriters of corporate debt on their distribution and certification capacities. Compared to non-merging firms, the pure investment bank merger (Morgan Stanley and Dean Witter) and the hybrid merger (Citicorp and Salomon) both enhance distribution ability. Neither merger improves certification ability. Furthermore, mergers do not enhance these underwriters' prestige. In co-led syndicates, the listing of merging firms' names tend to follow those of non-merging investment banks, which implies that followers resort to more cumbersome mergers while leaders improve internally to stay competitive. Finally, all other commercial banks that underwrite corporate debt enhance their distribution ability similarly to the hybrid merger.

Keywords: Glass Steagall, Gramm-Leach-Bliley, Underwriting, Mergers, Corporate Debt

JEL Classification: G21, G24, G28