How do financial intermediaries create value in security issues?
We study incentive provision in a model of securities issuance with an informed issuer and uninformed investors. We show that the presence of an informed intermediary may increase surplus even if we allow for collusion between the intermediary and the issuer. Collusion is neutralized by introducing...
| Main Authors: | , , |
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| Format: | Article |
| Language: | English |
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Oxford University Press
2014
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| Online Access: | https://eprints.nottingham.ac.uk/34956/ |
| _version_ | 1848794970442432512 |
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| author | Adriani, Fabrizio Deidda, Luca Sonderegger, Silvia |
| author_facet | Adriani, Fabrizio Deidda, Luca Sonderegger, Silvia |
| author_sort | Adriani, Fabrizio |
| building | Nottingham Research Data Repository |
| collection | Online Access |
| description | We study incentive provision in a model of securities issuance with an informed issuer and uninformed investors. We show that the presence of an informed intermediary may increase surplus even if we allow for collusion between the intermediary and the issuer. Collusion is neutralized by introducing a misalignment between the interests of the issuer and those of the intermediary. To achieve this, the intermediary commits to hold some of the securities. The intermediary then underprices the remaining securities and extracts any investor surplus through a “participation fee.” We provide an explanation for the diffusion of book building and quid pro quo practices in Initial Public Offerings (IPOs). |
| first_indexed | 2025-11-14T19:24:39Z |
| format | Article |
| id | nottingham-34956 |
| institution | University of Nottingham Malaysia Campus |
| institution_category | Local University |
| language | English |
| last_indexed | 2025-11-14T19:24:39Z |
| publishDate | 2014 |
| publisher | Oxford University Press |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | nottingham-349562017-10-13T16:44:36Z https://eprints.nottingham.ac.uk/34956/ How do financial intermediaries create value in security issues? Adriani, Fabrizio Deidda, Luca Sonderegger, Silvia We study incentive provision in a model of securities issuance with an informed issuer and uninformed investors. We show that the presence of an informed intermediary may increase surplus even if we allow for collusion between the intermediary and the issuer. Collusion is neutralized by introducing a misalignment between the interests of the issuer and those of the intermediary. To achieve this, the intermediary commits to hold some of the securities. The intermediary then underprices the remaining securities and extracts any investor surplus through a “participation fee.” We provide an explanation for the diffusion of book building and quid pro quo practices in Initial Public Offerings (IPOs). Oxford University Press 2014 Article PeerReviewed application/pdf en https://eprints.nottingham.ac.uk/34956/1/IPO_ROF_style2.pdf Adriani, Fabrizio, Deidda, Luca and Sonderegger, Silvia (2014) How do financial intermediaries create value in security issues? Review of Finance, 18 (5). pp. 1915-1951. ISSN 1573-692X http://rof.oxfordjournals.org/content/18/5/1915 doi:10.1093/rof/rft027 doi:10.1093/rof/rft027 |
| spellingShingle | Adriani, Fabrizio Deidda, Luca Sonderegger, Silvia How do financial intermediaries create value in security issues? |
| title | How do financial intermediaries create value in security issues? |
| title_full | How do financial intermediaries create value in security issues? |
| title_fullStr | How do financial intermediaries create value in security issues? |
| title_full_unstemmed | How do financial intermediaries create value in security issues? |
| title_short | How do financial intermediaries create value in security issues? |
| title_sort | how do financial intermediaries create value in security issues? |
| url | https://eprints.nottingham.ac.uk/34956/ https://eprints.nottingham.ac.uk/34956/ https://eprints.nottingham.ac.uk/34956/ |