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A new measure for heated negotiation in the IPO syndicate

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  • Jeon, Jin Q.
  • Lee, Cheolwoo

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.

Suggested Citation

  • Jeon, Jin Q. & Lee, Cheolwoo, 2015. "A new measure for heated negotiation in the IPO syndicate," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 278-304.
  • Handle: RePEc:eee:ecofin:v:33:y:2015:i:c:p:278-304
    DOI: 10.1016/j.najef.2015.06.002
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