Bank entry, competition, and the market for corporate securities underwriting

Amar Gande, Southern Methodist University
Manju Puri, Duke University
Anthony Saunders, New York University

Abstract

This paper examines the competitive effects of commercial bank entry into the corporate debt underwriting market, particularly with respect to underwriter spreads, ex-ante yields, and market concentration. We find that underwriter spreads and ex-ante yields have declined significantly with bank entry, consistent with the market becoming more competitive. This effect is strongest among the lower-rated and smaller debt issues of which banks have underwritten a relatively greater share. The early evidence also indicates that bank entry has tended to decrease market concentration. Overall, our results suggest that bank entry has had a pro-competitive effect.