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-analy tic event study support an infrastructure proposition in which money c enter versus regional banks benefit the most from expansion in underwr iting. Investment banks do not suffer significant loss from a market s hare reduction nor is there a significant wealth transfer from investm ent to commercial banks. Little evidence of a reduction in total risk around the event period is found.