Bank Entry, Competition and the Market for Corporate Securities Underwriting

This paper examines the competitive effects of recent commercial bank entry into the corporate debt underwriting market. In particular, the effects of bank entry on underwriter spreads, ex-ante yields, and market concentration. We find that underwriter spreads have declined significantly with bank entry, consistent with the market becoming more competitive. This effect is strongest among lower-credit rated and small-sized debt issues where banks have underwritten relatively more issues. We find a similar decline for ex-ante yields. The early evidence also indicates that bank entry has tended to decrease market concentration. Overall, our results suggest that bank entry has had a favorable pro-competitive effect.