Heated Negotiation within the Syndicate and IPOs

This paper examines the determinants of heated negotiation within the syndicate––i) between the lead underwriter and co-managers and ii) among co-managers––and how heated negotiation affects IPOs. We find that heated negotiation is positively related to underwriter compensation for the lead underwriter, the number of co-managers, and gross spread in dollars and negatively to underwriter compensation for co-managers and co-managers’ average reputation, The presence of co-manager all-star analysts is important for heated negotiation between the lead underwriter and co-managers but not a factor for that among co-managers. Heated negotiation appears to increase the number of market makers in the aftermarket and such result is more pronounced when there is heated negotiation among co-managers.