publication . Article . 2011

Advantageous innovation and imitation in the underwriting market for corporate securities.

Helios Herrera; Enrique Schroth;
Closed Access English
  • Published: 01 Jan 2011
Abstract
Investment banks that develop new corporate securities systematically lead the new underwriting market despite being imitated early by equally competitive rivals. We study how innovators and imitators set underwriting fees in order to identify empirically the source of this advantage. Using data of innovative securities since 1985, we do find that innovators set systematically higher fees than imitators. This premium decreases as more issues occur, and faster for later generation products. Imitation is also quicker for later generations. This evidence supports the hypothesis that the innovator has superior skills in structuring any given issue of the new securit...
Subjects
free text keywords: HG, Economics and Econometrics, Finance, Financial economics, Underwriting, Imitation, media_common.quotation_subject, media_common, Economics, Structuring, Innovator, Corporate security, Financial innovation, Investment banking, business.industry, business
Related Organizations
31 references, page 1 of 3

Allen, Franklin, and Douglas Gale, 1994, Financial Innovation and Risk Sharing, MIT Press, Cambridge, MA.

Altinkilic, Oya and Robert Hansen, 2000, “Are There Economies of Scale in Underwriting Fees? Evidence of Rising External Financing Costs”, Review of Financial Studies, 13(1), 191-218.

Bhattacharyya, Sugato and Vikram Nanda , 2000, “Client Discretion, Switching Costs, and Financial Innovation,” Review of Financial Studies, 13(4), 1101-1127.

Boldrin, Michele and David Levine, 2006, Copy Right: Against Intellectual Monopoly, Princeton University Press, New York, NY.

Eccles, Robert and Dwight Crane, 1988, Doing Deals: investment banks at work, Harvard Business School Press, Boston.

Finnerty, John, 1992, “An Overview of Corporate Securities Innovation,”Journal of Applied Corporate Finance, 4, 23-39.

Frame, Scott and White, Lawrence, 2004, “Empirical Studies of Financial Innovation: Lots of Talk, Little Action?,” Journal of Economic Literature, 42, 116-144.

Hauswald, Robert and Robert Marquez, 2003, “Loan Portfolio Quality and the Di¤usion of Technological Innovation,” Working Paper, American University and University of Maryland.

Ja¤e, Adam B. and Josh Lerner, 2004, Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What To Do About It, Princeton University Press, New York, NY.

Lerner, Josh, 2000, “Where Does State Street Lead? A First Look at Finance Patents, 1971-2000,” Journal of Finance, 57, 901-930. [OpenAIRE]

Mason, Robert, Robert Merton, André Perold and Peter Tufano, 1995, Cases in Financial Engineering: Applied Studies of Financial Innovation. Prentice Hall, New Jersey.

Miller, Merton, 1986, “Financial Innovation: The Last Twenty Years and the Next,” Journal of Financial and Quantitative Analysis, 21, 459-471.

Molyneux, Phil and Nidal Shamroukh, 1996, “Financial Innovation and Investor Wealth: The Case of Junk Bonds and Note Issuance Facilities,” Journal of Money, Credit and Banking, 28(3), 502-522. [OpenAIRE]

Persons, John and Vincent Warther, 1997, “Boom and Bust Patterns in the Adoption of Financial Innovations,”Review of Financial Studies, 10(4), 939-967.

Riddiough, Timothy, 2001, “Intermediation, Standardization and Learning in Financial Markets: Some Evidence and Implications,”Working paper, University of Wisconsin-Madison. [OpenAIRE]

31 references, page 1 of 3
Powered by OpenAIRE Research Graph
Any information missing or wrong?Report an Issue