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Eurobond underwriter spreads

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  • Neil Esho
  • Michael G. Kollo
  • Ian G. Sharpe

Abstract

We examine the determinants of underwriter spreads on straight/fixed rate Eurobonds issued by US firms between 1990 and 1998. We find that underwriter spreads are influenced by: (i) the governing law as it influences the timely and orderly renegotiation of contract terms, with bonds governed by English law having significantly lower spreads; (ii) the distribution mechanism, with spreads higher on public issues than private placements; (iii) underwriter reputation, with more reputable underwriters charging higher spreads; and (iv) the choice of currency, with spreads higher in the less frequently used currencies and/or in currencies where underwriting activities are more concentrated.

Suggested Citation

  • Neil Esho & Michael G. Kollo & Ian G. Sharpe, 2006. "Eurobond underwriter spreads," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 46(1), pages 71-95, March.
    • Handle: RePEc:bla:acctfi:v:46:y:2006:i:1:p:71-95
    DOI: 10.1111/j.1467-629X.2006.00162.x
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    Cited by:

    1. de Jong, A. & Roosenboom, P.G.J. & Schramade, W.L.J., 2005. "Bond underwriting fees and keiretsu affiliation in Japan," ERIM Report Series Research in Management ERS-2005-038-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    2. Shaina Potts, 2016. "Reterritorializing economic governance: Contracts, space, and law in transborder economic geographies," Environment and Planning A, , vol. 48(3), pages 523-539, March.
    3. Ishikawa Tomoko, 2014. "Collective Action Clauses in Sovereign Bond Contracts and Investment Treaty Arbitration – An Approach to Reconcile the Irreconcilable," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 4(2), pages 63-98, July.
    4. de Jong, Abe & Roosenboom, Peter & Schramade, Willem, 2006. "Bond underwriting fees and keiretsu affiliation in Japan," Pacific-Basin Finance Journal, Elsevier, vol. 14(5), pages 522-545, November.
    5. Kollo, Michael G., 2005. "Underwriter competition and gross spreads in the eurobond market," Working Paper Series 550, European Central Bank.
    6. Jose A. Lopez & Mark M. Spiegel, 2006. "Foreign bank lending and bond underwriting in Japan during the lost decade," Working Paper Series 2006-45, Federal Reserve Bank of San Francisco.
    7. Giuliano Iannotta & Marco Navone, 2008. "Which Factors Affect Bond Underwriting Fees? The Role of Banking Relationships," European Financial Management, European Financial Management Association, vol. 14(5), pages 944-961, November.
    8. Burch, Timothy R. & Nanda, Vikram & Warther, Vincent, 2005. "Does it pay to be loyal? An empirical analysis of underwriting relationships and fees," Journal of Financial Economics, Elsevier, vol. 77(3), pages 673-699, September.
    9. Engert, Andreas & Hornuf, Lars, 2018. "Market standards in financial contracting: The Euro’s effect on debt securities," Journal of International Money and Finance, Elsevier, vol. 85(C), pages 145-162.
    10. Carbó-Valverde, Santiago & Cuadros-Solas, Pedro J. & Rodríguez-Fernández, Francisco, 2017. "Do banks and industrial companies have equal access to reputable underwriters in debt markets?," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 176-202.

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    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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