Abstract
We show that corporate bond issuers benefit from utilizing existing underwriter relationships when rolling over bonds, but at the same time become exposed to underwriter distress. A strong relationship enables the underwriter to credibly certify the issuer resulting in lower direct issuance costs and lower underpricing. However, if the underwriter becomes distressed, this spills over to the issuer’s credit risk, because it weakens the relationship and increases the risk of involuntary relationship termination. The credit risk spillover is more pronounced for risky, opaque issuers with high rollover exposure, i.e., those issuers most in need of certification by an underwriter.
| Originalsprog | Engelsk |
|---|---|
| Publikationsdato | 2018 |
| Antal sider | 44 |
| Status | Udgivet - 2018 |
| Begivenhed | The Eighth Annual Applied Finance Conference of the Financial Management Association International 2018 - St. John's University Manhattan Campus, New York, USA Varighed: 11 maj 2018 → 11 maj 2018 Konferencens nummer: 8 https://www.fma.org/AFC2018 |
Konference
| Konference | The Eighth Annual Applied Finance Conference of the Financial Management Association International 2018 |
|---|---|
| Nummer | 8 |
| Lokation | St. John's University Manhattan Campus |
| Land/Område | USA |
| By | New York |
| Periode | 11/05/2018 → 11/05/2018 |
| Internetadresse |
Emneord
- Underwriter relationship
- Corporate bonds
- Certification
- Rollover risk
- Relationship banking