What is ‘Quid Pro Quo’
A Latin phrase meaning “something for something”. This term is typically used in financial circles to describe a mutual agreement between two parties in which each party provides a good or service in return for a good or service.
Explaining ‘Quid Pro Quo’
Quid pro quo agreements are sometimes viewed negatively. For example, in a quid pro quo agreement between a large financial house and a company, the financial house might alter poor stock ratings in exchange for company business. In response to these potential occurrences, the NASD has issued rules in order to ensure that firms put customers’ interests before their own.
A positive example of a quid pro quo agreement is a soft dollar agreement. In a soft dollar agreement, one firm (Firm A) uses another firm’s (Firm B) research. In exchange, Firm B executes all of Firm A’s trades. This exchange of services is used as payment in lieu of a traditional, hard dollar payment.
Further Reading
- Quid pro quo: Builders, politicians, and election finance in India – papers.ssrn.com [PDF]
- Quid pro quo? corporate returns to campaign contributions – www.journals.uchicago.edu [PDF]
- European economic government and the corporatist – onlinelibrary.wiley.com [PDF]
- Quid pro quo in IPOs: Why book-building is dominating auctions – papers.ssrn.com [PDF]
- The economics of campaign funds – link.springer.com [PDF]
