Bookrunner syndicate geography and the quality of service: The benefits of a local team. (December 2021)

• Record Type: Journal Article
• Authors: Krebbers, Arthur; Marshall, Andrew; McColgan, Patrick; Neupane, Biwesh
• Is Part Of: Journal of international money and finance. Volume 119(2022)
• Publication Date: 2021-12
• Subjects: Bookrunner geography -- At-issue credit spread -- Quality of service -- Financial crisis -- Eurozone crisis -- Placement function -- Geographical proximity; G11 -- G12 -- G24; International finance -- Periodicals; Foreign exchange -- Periodicals; Finances internationales -- Périodiques; Change -- Périodiques; Foreign exchange; International finance; Periodicals; 332.04205
• DOI: 10.1016/j.jimonfin.2021.102500
• Languages: English
• ISSNs: 0261-5606

Abstract

Highlights: The geography of bookrunner syndicates affects the quality of service provided to bond issuing firms. Syndicates with a higher share of domestic bookrunners obtain lower at-issue credit spreads for issuing firms. Tranches issued during the financial crisis and the eurozone crisis periods drive these findings. Both certification and placement roles become important to bond issuers in these crisis periods characterised by high information asymmetry. Abstract: We analyze how the geography of bookrunner syndicates affects the quality of service provided to bond issuing firms, as reflected in the pricing of euro-denominated corporate bond tranches. We find that syndicates with a higher share of domestic bookrunners obtain lower at-issue credit spreads for issuing firms. Domestic bookrunners can have locational advantage which not only gives them better access to the investors base, it also gives them "soft" informational advantage as they are more familiar with the bond issuer. We find that the tranches issued during the financial crisis and the eurozone crisis periods drive our findings, and both certification and placement roles become important to bond issuers in these crisis periods characterised by high information asymmetry. Our results are robust to other definitions of bookrunner geography.