OTHER THINGS EQUAL, the higher the per share price which an investment banker sets on an unseasoned issue of common stock which he is offering for sale, the greater is the risk of a prolonged distribution period.' This will increase the expected costs of inventory holding, investor search, and postoffering price stabilization and may also increase the probability of loss as a consequence of adverse market movements. The greater the risk, the higher should be his demand for risk bearing compensation, or per share cash spread. Hence the investment banker is faced with simultaneous decisions concerning the pricing of an unseasoned equity issue and the amount of cash spread he should seek from the issuer. The purpose of this paper is primarily the emipirical examination of the trade-off between price and cash spread and secondarily the identification of other factors influencing these decisions; this is accomplished via a simultaneous system of equations where the endogenous variables are price and cash spread and the exogenous variables are issue and company characteristics and security market conditions at the time of issue. Although a number of studies have focused on new issue price performance (e.g., [9]), little robust empirical research has been carried on in the area of investment banking decision making, that is, the economics underlying the phenomenon of new issues performance. A representative sample is, however, worth mentioning. West [15, 16] examined the market for unseasoned municipal bonds and identified determinants of post offering premia on new bonds (a rough surrogate for pricing) and the determinants of cash spread. However, he studied these aspects separately. Mendelson (Underwriter Compensation in Friend et al. [2]) empirically analyzed investment banker compensation on common stock issues, but included price as an independent variable in his single equation regression models, thus hindering insight into the simultaneous nature of the price/cash spread decision. Logue [7] examined the determinants of performance on unseasoned equity issues but used percentage cash spread as an independent variable. Elsewhere, Logue [8] developed a simultaneous system and postulated a relationship between new issue performance and percentage cash spread but obtained poor results. From the analysis presented