IPO UNDERWRITING COST IN ASIA-PACIFIC

Abstract

This paper investigates distributions ofgross spread in terms ofthe 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 % o f IPOs have combined selling concession, underwriting, and management fees. The study does notfind evidence that the gross spread affect the success ofIPOs. 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 offees is important to increase the success of!PO underwriting.