Bond underwriting fees and keiretsu affiliation in Japan

We examine fees on bonds issued by Japanese corporations during the 1994–2002 period. Over time, we find that fees have increased for those firms that are related to bank-led (financial) keiretsu, even after controlling for risk factors. During the same period, fees have fallen for firms not belonging to keiretsu. The higher fees for keiretsu firms were not offset by lower yields. It seems that, against the background of bond market deregulation and weaker banks, keiretsu membership has become a burden rather than an advantage.