The IPO Spread and Conflicts of Interests

Naoki Kojima ()

Public Policy Discussion Papers from Economics and Finance Section, School of Social Sciences, Brunel University

Abstract: The 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.

Pages: 25 pages
Date: 2004-05
New Economics Papers: this item is included in nep-fin and nep-ifn
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Persistent link: https://EconPapers.repec.org/RePEc:bru:bruppp:04-06

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