In a period when the risk of default on credit bonds is high, the factors that influence the outcome of spreads on credit bonds are now a major issue. The lead underwriter has a significant role, either when it comes to due diligence during the initial phase of the bond’s underwriting, conducting information disclosure, or at the final stage of bond underwriting and issuance investigation (Huang and colleagues. 2020). In terms of the impact of information, the more experienced underwriters have better due diligence capabilities as well as more sources and channels to validate and extract data, which makes the disclosed information more specific and reliable and thus reduces the amount of asymmetry of the information (Zhang 2023). Concerning the personnel, more experienced underwriters also have more experienced due diligence groups. When they reach the end of the issue, strong underwriters will have higher sales personnel and higher sales rates. They can present more specific and professional information on the issuer in their marketing to investors and also have better public relations capabilities, which means they are able to reduce the amount of asymmetric information from the company that issues bonds and reduce the risk posed by the asymmetry of data used in the pricing of bonds (Ding and co. 2022). This reduces the risk due to information asymmetry in the pricing of bonds (Ding et al. 2022).

As for the guarantee effect, the lead underwriter with more credibility and power can also create an assurance for the bonds after the bonds underwritten are in default. If other events are risky that the underwriter is unable to handle, the underwriter loses the issuer’s as well as investors’ trust, which is devastating to the business of the underwriter (Singh 2022). If there is a default on bonds, underwriters can be penalized by regulators, usually with limitations regarding their business operations, including short-term disqualification of underwriters. This will cause harm to the underwriters in terms of loss of clients of issuers and a decrease in trust from investors and will impact the underwriters’ other business (Apergis and Co. 2022). Therefore, investors also have greater confidence that underwriters with higher ratings will pick clients who are more qualified and thus create an unspoken security.

Apart from the information and guarantee impacts, the strength of underwriters also influences the spread of information on bond issues through influencing the bond information ratings (Krebbers and others. 2022). There is a first incentive for underwriters to reduce the rates of issuance. Underwriters and issuers share an employee-employer relationship and the issuer has to pay for the underwriter to attempt to satisfy the requirements of the issuer as far as it is possible, i.e. in the assumption that bonds will be successfully issued the underwriter will seek to lower the interest rate on bonds to decrease the cost of financing for the issuer and, in the enticing market competition in the underwriting issuers will select the underwriter that has more broad strength, and also with the most prominent underwriter’s the social resources and experience in underwriting that the lead underwriter has in order to achieve a lower rate of discovery. Because of the increasing fierce underwriting competition of brokerage companies, underwriters be attempting to keep good relations with issuers of high quality and will do to satisfy issues’ needs.

This paper examines the relationship between the strength of an underwriter and the spread of bond issuance credit by using a sample of corporate bonds that were issued from 2011 until 2022. It was found that strength of the underwriter influences the spreads of credit for bond issuance The stronger the underwriter, less spreads of credit for bond issuance written, the stronger the underwriter, and the less costs of bond issue; regarding their mechanism for action the underwriters have the ability to influence bond issuance spreads by influencing rating of bond credit, i.e., the rating of the bond plays the function as an intermediary variable as compared to state-owned businesses where the property rights of the bond is not owned by the state The strength of the underwriter can reduce the spreads of credit on bonds in a larger extent.

The principal contribution of this paper is that built on the current mechanism that influences underwriter strength on bond spreads, it offers an entirely new way to alter credit spreads via bonds’ credit ratings. The results of this study provide new evidence from empirical research to explain the effect of the strength of financial intermediaries on the pricing of bonds.

Section A few snippets

Theoretical analysis and the development of hypotheses

In the process of issuance of bonds, there are financial intermediaries that exist to minimize the amount of information dispersion. Financial intermediaries evaluate the issuer as well as the bond in accordance with their respective duties in the bond issuance process, and the various information that is they have access to and, to some extent, they make their information publicly accessible. Regarding the impact of information, the better the underwriter’s position in the pre-discovery stage and the more able it is in conducting due diligence as well as other

Sample

In this paper, all information on corporate bonds issued between the year 2011 until 2022 are used as research samples. the data samples are screened, and the data is cleaned. First, since financial firms are characterized by their liabilities and assets, as well as their operating type are differing from the other types of industries and industries, a financial industry sample is suggested along with the ones with no data for a variety of variables. Since bonds may include co-lead underwriters this study is based on into account the SEC assessment of the initial lead

Descriptive statistics

The results of descriptive statistics analysis are presented in Table 2. The average of the spread is 2.396, and the variance is 1.453. The minimum value is 0.432, and the highest value is 5.695. This means that investors require some spreads on corporate bonds. The average rank is 7.013. This means that the general qualification of the corporate bond sub-writers is good, and it can be noticed that the better underwriters hold a greater market share.

Main results