The structure of investment bank syndicates and the quality of bond underwriting

We analyze how the structure of bookrunner syndicates affects the quality of their service to issuers as reflected in the pricing of euro-denominated bond tranches. We find that domestic banks obtain lower at-issue credit spreads for issuing firms, highlighting the importance of ongoing banking relationships in achieving the highest quality of intermediary services. Larger bookrunner syndicates are associated with higher credit spreads and the inclusion of a passive bookrunner to the syndicate reduces credit spreads. Bookrunner reputation is of secondary importance in the pricing of our sample bond tranches. We find significant changes in the structure of bookrunner syndicates following the global financial crisis, and our findings on the impact of bookrunner syndicates for pricing are driven by tranches issued during the post-crisis period. This highlights that investors place greater emphasis on the information provided by financial intermediaries when there is greater heterogeneity in syndicate structure during the post-crisis period