The Value of Bond Underwriter Relationships

Jens Dick-Nielsen*, Mads Stenbo Nielsen, Stine Louise von Rüden

*Corresponding author af dette arbejde

Publikation: Bidrag til tidsskriftTidsskriftartikelForskningpeer review

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, information-sensitive issuers with high rollover exposure, i.e., those issuers most in need of certification by an underwriter.
OriginalsprogEngelsk
Artikelnummer101930
TidsskriftJournal of Corporate Finance
Vol/bind68
Antal sider18
ISSN0929-1199
DOI
StatusUdgivet - jun. 2021

Bibliografisk note

Published online: 23 March 2021

Emneord

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

Citationsformater