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.
| Original language | English |
|---|---|
| Publication date | 2017 |
| Number of pages | 44 |
| Publication status | Published - 2017 |
| Event | The 15th International Paris December Finance Meeting - Novotel Paris les Halles hotel, Paris, France Duration: 21 Dec 2017 → 21 Dec 2017 Conference number: 15 https://www.eurofidai.org/fr/paris-december-2017 |
Conference
| Conference | The 15th International Paris December Finance Meeting |
|---|---|
| Number | 15 |
| Location | Novotel Paris les Halles hotel |
| Country/Territory | France |
| City | Paris |
| Period | 21/12/2017 → 21/12/2017 |
| Internet address |
Keywords
- Underwriter relationship
- Corporate bonds
- Certification
- Rollover risk
- Relationship banking