The Impact of Underwriter's Reputation on the Price of Capital the Return and the Underwriter Selection

Bachelor Thesis from the year 2013 in the subject Business economics - Investment and Finance grade: 80 Maastricht University (School of Business and Economics) language: English abstract: This paper will try to elaborate on the different and sometimes mixed empirical results testing the relationship between underwriter's reputation and the price of the capital issue. Firstly the two most cited and used ways of measuring reputation will be explained. Secondly the relationship between reputation and issue pricing will be analysed from different perspectives. Thirdly the existence of a relationship between reputation and fees as well as between reputation and proceeds will be proven. After that commercial and investment banks as underwriters will be compared and it will be shown that there are reasons to choose a commercial bank as an underwriter. Finally the mechanics of how underwriters are being chosen and the reasons for switching underwriters will be analysed before ending this study with a conclusion.