Security Issuance, Institutional Investors and Quid Pro Quo
General Finance
2024-07-30 v5 General Economics
Economics
Abstract
Securities issuance through intermediaries is subject to agency problems and informational frictions. We examine these effects using SPAC data. We identify ``premium'' investors whose participation is linked to lower liquidation risk, higher returns, and lower redemption rates, consistent with both informational rents and agency frictions. In contrast, ``non-premium'' investors engage in non-agency quid pro quo relationships. Specifically, they receive high returns from an intermediary (quid) in exchange for a tacit agreement to participate in weaker future deals (quo). These relationships serve as insurance for issuers and intermediaries, enabling more issuers to access markets.
Keywords
Cite
@article{arxiv.2211.16643,
title = {Security Issuance, Institutional Investors and Quid Pro Quo},
author = {Gaurab Aryal and Zhaohui Chen and Yuchi Yao and Chris Yung},
journal= {arXiv preprint arXiv:2211.16643},
year = {2024}
}