Competition and Coalition among Underwriters: The Decision to Join a Syndicate



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    • Bennett S. LeBow College of Business, Drexel University. An earlier draft of this paper was circulated under the title “Competition and Coalition among Underwriters: The Entry Strategy of Commercial Banks in the Post-section 20 Era.” Part of the work was done when I was a doctoral student at Michigan State University. I am indebted to my dissertation committee, Assem Safieddine, Anil Shivdasani, Charles Hadlock, and Naveen Khanna, for their guidance and suggestions. I would like to thank Franklin Allen, Michael Cichello, Jay Coughenour, Lily Fang, Lawrence Goldberg, Michael Gombola, Paul Malatesta, Dalia Marciukaityte, Joseph Mason, Andrew Metrick, Samuel Szewczyk, Elizabeth Webb, and the seminar participants at Michigan State University, the University of Delaware, and the 2002 FMA Meetings for their useful comments. I am especially grateful to Rick Green (the editor) and an anonymous referee for detailed and insightful comments. Any errors or omissions are my own.


This paper studies the decision of lead investment banks to organize hybrid syndicates (commercial banks participating as co-managers) versus pure investment bank syndicates. The findings show that hybrid underwriting issues are more challenging to float. Compared to pure investment bank syndicates, hybrid syndicates serve clients that are smaller, have lower common stock rankings and less prior access to the capital markets, rely more on bank loans, and invest less capital but issue larger amounts, which indicates that commercial banks' participation enhances hybrid services. Moreover, lead investment banks tend to invite banks' participation when clients exhibit higher loyalty in reusing their services.