TY  - UNPD
A1  - Laux, Christian
A1  - Walz, Uwe
T1  - Tying lending and underwriting : scope economies, incentives, and reputation
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2006,27
N2  - Informational economies of scope between lending and underwriting are a mixed blessing for universal banks. While they can reduce the cost of raising capital for a firm, they also reduce incentives in the underwriting business. We show that tying lending and underwriting helps to overcome this dilemma. First, risky debt in tied deals works as a bond to increase underwriting incentives. Second, with limitations on contracting, tying reduces the underwriting rents as the additional incentives from debt can substitute for monetary incentives. In addition, reducing the yield on the tied debt is a means to pay for the rent in the underwriting business and to transfer informational benefits to the client. Thus, tying is a double edged sword for universal banks. It helps to compete against specialized investment banks, but it can reduce the rent to be earned in investment banking when universal banks compete against each other. We derive several empirical predictions regarding the characteristics of tied deals. JEL Classification: G21, G24, D49
T3  - CFS working paper series - 2006, 27 
KW  - Tying
KW  - Investment Banking
KW  - Universal Banking
KW  - Tying
KW  - Investment Banking
KW  - Universal Banking
Y1  - 2006
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/1630
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30-38017
IS  - This Version: October 2006
ER  -