A New Measure for Heated Negotiation in the IPO Syndicate
North American Journal of Economics and Finance, Forthcoming
43 Pages Posted: 13 Aug 2012 Last revised: 13 Jun 2015
Date Written: April 27, 2015
This paper develops novel measures for heated negotiation within the IPO syndicate –– i) between the lead underwriter and co-managers and ii) among co-managers. We find that the inferior bargaining position for the lead underwriter and superior bargaining power for co-managers with initial low compensation for co-managers lead to heated negotiation. Our results indicate that underwriters do not negotiate their shares of compensation based on their pre-commitment and actual provision of key underwriter services. Rather, it appears that heated negotiation materializes as co-managers resist against the lead underwriter’s initial unfair profit sharing design.
Keywords: heated negotiation, syndicate, IPOs, underwriter, analyst coverage
JEL Classification: G24
Suggested Citation: Suggested Citation