Which of the following is not a reasonable argument for the increase in the number of banks that can compete in security underwriting activities?
A)Small firms gain increased access to the capital markets.
B)Lower commission and fee expense for firms issuing securities.
C)Issuing firms realize an increase in the degree of underpricing of new issues.
D)The market for securities underwriting will see a decline in market concentration.
E)More competition will increase the new issue proceeds to the issuing firm.

Question

Quizplus · Accepted Answer

An increase in the degree of underpricing of new issues would not be a reasonable argument for the increase in the number of banks that can compete in security underwriting activities, as it implies that there is an inefficiency in the market that results in firms leaving money on the table. The other choices are reasonable arguments, as they suggest benefits to both issuing firms and investors in terms of access to capital and lower costs.

Which of the Following Is Not a Reasonable Argument for the Increase