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The Value of Investment Banking Relationships: Evidence from the Collapse of Lehman Brothers

Fernando, Chitru S. ; May, Anthony D. ; Megginson, William L.

The Journal of Finance, 1 February 2012, Vol.67(1), pp.235-270 [Peer Reviewed Journal]

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Title:
The Value of Investment Banking Relationships: Evidence from the Collapse of Lehman Brothers
Author/Creator: Fernando, Chitru S. ; May, Anthony D. ; Megginson, William L.
Language: English
Subjects: Business -- Industry -- Industrial sectors ; Business -- Industry -- Industrial sectors ; Economics -- Economic disciplines -- Financial economics ; Economics -- Economic disciplines -- Financial economics ; Business -- Accountancy -- Financial accounting ; Business -- Accountancy -- Financial accounting ; Economics -- Economic disciplines -- Financial economics ; Economics -- Economic disciplines -- Financial economics ; Business -- Industry -- Industrial sectors ; Economics -- Economic disciplines -- Financial economics
Is Part Of: The Journal of Finance, 1 February 2012, Vol.67(1), pp.235-270
Description: We examine the long-standing question of whether firms derive value from investment bank relationships by studying how the Lehman collapse affected industrial firms that received underwriting, advisory, analyst, and market-making services from Lehman. Equity underwriting clients experienced an abnormal return of around -5%, on average, in the 7 days surrounding Lehman's bankruptcy, amounting to $23 billion in aggregate risk-adjusted losses. Losses were especially severe for companies that had stronger and broader security underwriting relationships with Lehman or were smaller, younger, and more financially constrained. Other client groups were not adversely affected.
Identifier: ISSN: 00221082 ; E-ISSN: 15406261

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