On the costs of issuing shares
The present paper models the process of issuing new equity as a three-stage game. first the issuing firm is allowed to negotiate with several investment-bankers on an underwriting contract. then the shares are issued at a primary market tothe public and, finally, investors can trade shares at a seco...| Link(s) zu Dokument(en): | IHS Publikation |
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| Hauptverfasser: | , |
| Format: | IHS Series NonPeerReviewed |
| Sprache: | Englisch |
| Veröffentlicht: |
institut fuer hoehere studien
1991
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| Zusammenfassung: | The present paper models the process of issuing new equity as a three-stage game. first the issuing firm is allowed to negotiate with several investment-bankers on an underwriting contract. then the shares are issued at a primary market tothe public and, finally, investors can trade shares at a secondary market. under symmetric information the costs of issuing shares in equilibrium consists of two parts: underpricing at the primary market and the cost of an underwriting contract, where the incentive to conclude the latter stems from the danger of even more severe underpricing in a non-underwritten issue.; |
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