Bond underwriting syndicates organized by commercial banks: evidence from prewar Japan

The purpose of this paper is to empirically examine the nature of bond underwriting syndicates organized by commercial banks. I use a unique data set from Japan during a prewar period when banks were permitted to underwrite corporate bonds. The paper shows that risk aversion led to a greater tendency for investment houses to form a syndicate than commercial banks. The evidence is consistent with the argument against universal banking that asserts that commercial banks will be exposed to underwriting risk, thereby potentially undermining the stability of banking system. J. Japanese Int. Economies19 (3) (2005) 303-321.