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The Impact of Bank Entry in the Japanese Corporate Bond Underwriting Market

Colin McKenzie and Sumiko Takaoka

No 128, Econometric Society 2004 Australasian Meetings from Econometric Society

Abstract: The 1993 Japanese financial system reform allowed banks to enter the underwriting market for corporate bonds through bank-owned security subsidiaries. This paper examines empirically whether underwriting commissions and spreads for corporate bonds fell as a result of this bank entry. The empirical results show that bank entry significantly lowers underwriting commissions. Commissions charged by banks are significantly lower than those charged by investment houses. In contrast, there is no strong evidence that bond spreads are significantly lowered by bank entry. A main bank relationship between the issuing firm and the parent of a bank-owned underwriting subsidiary does not have any significant influence in commission setting or the determination of spreads

Keywords: financial system reform; bank entry; bank share; commission; main bank; spread; underwriting (search for similar items in EconPapers)
JEL-codes: G2 K22 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-com and nep-law
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Journal Article: The impact of bank entry in the Japanese corporate bond underwriting market (2006) Downloads
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