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Underwriting relationships: Information production costs, underwriting fees, and first mover advantage

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Abstract

We study underwriting relationships in the floating rate debt market, where many issuers have a large number of offerings. We find that frequent issuers maintain close relationship with only three to five underwriters and pay significantly less underwriting fees than infrequent issuers. The findings are consistent with the notion that starting an underwriting relationship requires expenses for information production. We also find that an issuer’s first underwriter has a cost advantage over later-comers in competing for the issuer’s business. As a result, the first underwriter wins a larger share of the issuer’s business.

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Authors and Affiliations

  1. Department of Finance, College of Business, Florida State University, Tallahassee, FL, 32306, USA

    James S. Ang

  2. Division of Banking and Finance, Nanyang Business School, Nanyang Technological University, Singapore, 639808

    Shaojun Zhang

Authors
  1. James S. Ang
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  2. Shaojun Zhang
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Correspondence to James S. Ang.

Additional information

JEL Classification G21 · G24

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Ang, J.S., Zhang, S. Underwriting relationships: Information production costs, underwriting fees, and first mover advantage. Rev Quant Finan Acc 27, 205–229 (2006). https://doi.org/10.1007/s11156-006-8796-1

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  • DOI: https://doi.org/10.1007/s11156-006-8796-1

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