The IPO Spread and Conflicts of Interests
AbstractThe level of the IPO spread taken by the underwriter is a controversial issue.Some claim that the level is too high and attributes it to collusion between investment banks while others contend to the contrary. The paper examines the spread in the framework of conflicts of interests between the issuer, the underwriter and the informed investor. The argument is developed, based upon incentives for the underwriter. It is shown that the issuer should have the spread large enough for the underwriter to stay faithful to the issuer.
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Bibliographic InfoPaper provided by Economics and Finance Section, School of Social Sciences, Brunel University in its series Public Policy Discussion Papers with number 04-06.
Length: 25 pages
Date of creation: May 2004
Date of revision:
Contact details of provider:
Postal: Brunel University, Uxbridge, Middlesex UB8 3PH, UK
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-05-26 (All new papers)
- NEP-FIN-2004-05-26 (Finance)
- NEP-IFN-2004-05-26 (International Finance)
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