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

See all articles by Jin Jeon

Jin Jeon

Dongguk University

Cheolwoo Lee

Ferris State University

Date Written: April 27, 2015

Abstract

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

Jeon, Jin and Lee, Cheolwoo, A New Measure for Heated Negotiation in the IPO Syndicate (April 27, 2015). North American Journal of Economics and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2128442 or http://dx.doi.org/10.2139/ssrn.2128442

Jin Jeon (Contact Author)

Dongguk University ( email )

26 Pil-dong 3-ga
Jung-gu
Seoul, Seoul 100-715
Korea, Republic of (South Korea)

Cheolwoo Lee

Ferris State University ( email )

119 South State Street, BUS 366
Big Rapids, MI 49307
United States

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