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Title: The IPO spread and conflicts of interests
Authors: Kojima, N
Keywords: IPO spread, asymmetric information, mechanism design
Issue Date: 2004
Publisher: Brunel University
Citation: Economics and Finance Working papers, Brunel University, 04-06
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.
Appears in Collections:Economics and Finance
Dept of Economics and Finance Research Papers

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