Bond underwriting fees and keiretsu affiliation in Japan

We examine fees on bonds issued by Japanese corporations during the 1994-2002 period. We relate fees to firms’ membership of bank-led (financial) keiretsu. For the full sample of firms, we establish a positive relation between fees and risk factors. Over time, we find that fees have increased for those firms that are related to financial keiretsu, even after controlling for risk factors. But during the same period, fees have fallen for firms not belonging to keiretsu. It seems that, against the background of bond market deregulation and weaker banks, keiretsu membership has become a burden rather than an advantage.