IPO underpricing and the endogenous effect of underwriters' fees and reputation.

This study seeks to examine the inter-correlated relationship between underwriters’ reputation, risk characteristics of issuers, underpricing and the amount of underwriting fees charged. Previous literature has provided the groundwork in establishing the relationship between the four variables. This paper seeks to reexamine the results with an updated sample set. We empirically found that high reputation underwriters charge lower fees and this is due to the existence of economies of scale and the tendency of more prestigious underwriters to take on less risky issues. However, the lower fees charged have a detrimental effect on the amount of ‘money left on the table’. Additionally, the consensus view of more prestigious underwriters reducing underpricing of their issues had been proven to change from the 1990s onwards, in line with empirical results in Beatty et al. (1998)