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Real Effects of Investement Banking Relationships: Evidence from the Financial Crisis
Series
School of Finance Working Paper Series
Type
working paper
Date Issued
2014
Author(s)
Oesch, David
Schuette, Dustin
Walter, Ingo
Abstract
We investigate the damage to real-sector investment spending and corporate financing activities triggered by the failure of three major investment banks during the 2007-09 financial crisis. We find that corporations characterized by pre-crisis corporate investment banking relationships with troubled investment banks exhibit significantly lower post-crisis investment spending activity and securities issuance compared to corporations that were not affiliated with the troubled institutions. The effect varies systematically with the nature and strength of the investment banking relationship. Our results are robust with respect to various modifications and extensions of our empirical design (including a matched control sample) and generally inconsistent with alternative explanations unrelated to investment banking relationships.
Language
English
Keywords
firm-underwriter relationship
investment banking
financial crisis
financial shocks
real effects
investment
financing
cash holdings
HSG Classification
contribution to scientific community
Refereed
No
Publisher
SoF - HSG
Publisher place
St. Gallen
Number
2014/5
Subject(s)
Division(s)
Eprints ID
230506