The Distribution of Fees within the IPO Syndicate
AbstractThis paper examines the division of fees within the IPO underwriting syndicate using data on 4,186 US IPOs in the 1990s. Like the 7% gross spread, the standard contract of 20% management fee, 20% underwriting fee, and 60% selling concession has become more common in recent years. There exists, however, significant variation from these standard percentages. The percentage of the total spread paid as selling concessions increases with offering size. This result is attributed to differential economies of scale in managing and underwriting an IPO versus selling it and to differences in bargaining power.
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Bibliographic InfoArticle provided by Financial Management Association in its journal Financial Management.
Volume (Year): 30 (2001)
Issue (Month): 4 (Winter)
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- Garner, Jacqueline L. & Marshall, Beverly B., 2010. "The non-7% solution," Journal of Banking & Finance, Elsevier, vol. 34(7), pages 1664-1674, July.
- Trauten, Andreas, 2004. "Zur Effizienz von Wertpapieremissionen über Internetplattformen," Working Papers 8, Competence Center Internet Economy and Hybrid Systems, European Research Center for Information Systems (ERCIS), University of Münster.
- Jeon, Jin Q. & Ligon, James A., 2011. "The role of co-managers in reducing flotation costs: Evidence from seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 35(5), pages 1041-1056, May.
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