Integration of Lending and Underwriting: Implications of Scope Economies

A Comparison of Syndicated Loan Pricing at Investment and Commercial Banks

“…Qi (1998, 2003) and Puri (1999) show how these economies can rationalize lending and underwriting combinations, but scope-based cost advantages can apply broadly across the product set offered by lenders. The impact on loan pricing is again ambiguous since, as Kanatas and Qi (2003) and Puri (1999) note, scope economies also could result in market power and some capacity to influence prices. Drucker and Puri (2005) report evidence of scope economies in commercial lending and underwriting, based primarily on the reusability of information, that works to the advantage of both commercial and investment bank customers.…”

The Financial Services Modernization Act: Evolution or Revolution?

“…Economies of scale might result from consolidating back-office functions such as information technology and managerial overhead. Economies of scope could accrue because the universal bank can transfer the costly information obtained on a given loan customer to its brokerage department when underwriting securities for the same customer (Kanatas & Qi, 2003). By capturing these economies, financial institutions potentially can pass the benefits on to consumers in the form of lower prices or improved services.…”

Global Asset Management

“…Indeed, when we controlled the industry for this potential problem by including the lagged market index as a regression, the resulting coefficient was negative and statistically insignificant. We obtained the following model, estimated over days -300 to -50 prior to the announce- Kanatas and Qi (2003) and Saunders and Walter (1997).…”