EXPANDED SECURITIES UNDERWRITING - IMPLICATIONS FOR BANK RISK AND RETURN

This paper investigates the effects of a Federal Reserve Board ruling in 1987 that expanded the securities underwriting ability for Citicorp, J. P. Morgan, and Bankers Trust. Results derived from a factor-analytic event study support an infrastructure proposition in which money center versus regional banks benefit the most from expansion in underwriting. Investment banks do not suffer significant loss from a market share reduction nor is there a significant wealth transfer from investment to commercial banks. Little evidence of a reduction in total risk around the event period is found.