Effects of separating commercial and investment banking: Evidence from the dissolution of a joint venture investment bank

Fumio Akiyoshi

Journal of Financial Economics, 2019, vol. 134, issue 3, 703-714

Abstract: This study investigates how firms are affected by the separation of commercial and investment banking, using unique data from the dissolution of Japan’s Daiwa Securities SMBC, a joint venture investment bank. This event prevented its client firms from receiving a combination of lending and underwriting services. After the dissolution, these firms experienced a sharper decline in market value, more frequent switching of seasoned equity offering (SEO) underwriters, and the disappearance of lower SEO discounts when they had close lending relationships with Sumitomo Mitsui Financial Group, the ex-parent commercial bank. Thus, separating the two banking businesses would impose costs on firms.

Keywords: Glass–Steagall Act; Universal banking; Informational economies of scope; Certification effect (search for similar items in EconPapers)
JEL-codes: G21 G24 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:134:y:2019:i:3:p:703-714

DOI: 10.1016/j.jfineco.2019.05.004

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