The Value of Bond Underwriter Relationships

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Abstrakt

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.
OriginalsprogEngelsk
Publikationsdato2018
Antal sider44
StatusUdgivet - 2018
Begivenhed2018 Financial Management Association European Conference - University of Agder, Kristiansand, Norge
Varighed: 13 jun. 201815 jun. 2018
http://www.fmaconferences.org/Norway/NorwayProgram.htm

Konference

Konference2018 Financial Management Association European Conference
LokationUniversity of Agder
LandNorge
ByKristiansand
Periode13/06/201815/06/2018
Internetadresse

Emneord

  • Underwriter relationship
  • Corporate bonds
  • Certification
  • Rollover risk
  • Relationship banking

Citationsformater

Daetz, S. L., Dick-Nielsen, J., & Nielsen, M. S. (2018). The Value of Bond Underwriter Relationships. Afhandling præsenteret på 2018 Financial Management Association European Conference, Kristiansand, Norge.