IPO UNDERWRITING COST IN ASIA-PACIFIC

This paper investigates distributions of gross spread in terms of the selling concession, underwriting, and management fees within Asia-Pacific countries. This study also examines the factors that affect the underwriters' incentive to conduct "successful" initial public offerings (IPOs) measured by probability and the percentage of overallotment option. The study finds that underwriters rarely exercise the overallotment options; and 95.5% of IPOs have combined selling concession, underwriting, and management fees. The study does not find evidence that the gross spread affect the success of IPOs. However, when the components of gross spread stated as selling concession, underwriting, and management fees significantly affect the investment banks' incentive to conduct successful IPOs. This finding implies that separating the gross spread into its three components of fees is important to increase the success of IPO underwriting.