On the importance of retail banking relationships

Published

Journal Article

We use proprietary data to analyze the importance of retail banking relationships to commercial banks and their depositors when banks underwrite securities. We find lead underwriters' retail customers benefit as they demand and end up with significantly more of the highly underpriced issues. We find it is actual underpricing beyond that predicted by grey markets that drive the differential demand from the lead bank retail clientele, suggesting that banks pass on information about underpriced initial public offerings to their retail depositors. We analyze banks' incentives for such behavior and find evidence of banks benefiting through retail cross-selling-both brokerage accounts and consumer loans increase significantly. © 2008 Elsevier B.V. All rights reserved.

Full Text

Duke Authors

Cited Authors

  • Puri, M; Rocholl, J

Published Date

  • August 1, 2008

Published In

Volume / Issue

  • 89 / 2

Start / End Page

  • 253 - 267

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/j.jfineco.2007.07.005

Citation Source

  • Scopus