Equity underwriting spreads at commercial bank holding companies and investment banks

This paper offers a descriptive analysis of relative equity issue costs at commercial bank-affiliated and investment bank underwriters over the period 1995-1999. We estimate models for the gross spreads associated with IPOs, but disaggregate the sample by type of underwriter. We find that gross spreads of 7 percent for IPOs are more predominant for commercial-bank related underwriters than for investment banks. Our specifications are driven by theoretical arguments that bank-related underwriters could have certain competitive advantages over investment banks in securities underwriting. We find that different factors influence gross spreads on IPOs led by commercial banks and investment banks. When the issuing firm is well known, commercial bank-affiliated firms clearly have no competitive advantage. © 2005 Springer Science + Business Media, Inc.