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The Effect of Banks’ Commission Fees in Brazilian IPOs’ Underpricing

Medeiros de Mattos Brito, Thiago LU (2019) NEKN02 20191
Department of Economics
Abstract
It is known that underpricing is a widely researched topic worldwide by many different aspects, having instigated studies over the last decades to find reasons in order to explain this phenomenon. However, its relation with banks’ commission fees is still a little explored field, possibly due to the lack of data available to test for this hypothesis. This context raises the following research question: Are underwriters’ commission fees a determinant of IPO underpricing? In Brazil, when companies are willing to raise funds in the stock exchange, they are required to disclose in the IPO prospectus the amount of fees to be paid to underwriters, auditors and attorneys. Based on this available data for the Brazilian market, it will be possible... (More)
It is known that underpricing is a widely researched topic worldwide by many different aspects, having instigated studies over the last decades to find reasons in order to explain this phenomenon. However, its relation with banks’ commission fees is still a little explored field, possibly due to the lack of data available to test for this hypothesis. This context raises the following research question: Are underwriters’ commission fees a determinant of IPO underpricing? In Brazil, when companies are willing to raise funds in the stock exchange, they are required to disclose in the IPO prospectus the amount of fees to be paid to underwriters, auditors and attorneys. Based on this available data for the Brazilian market, it will be possible to test the hypothesis of a relation between underpricing and bank’s commission fees, as well as to explore its potential theoretical motivations. Data from 125 Brazilian companies that went public during the period 2007-2018 were collected in order to proceed with this analysis. Multiple linear regressions accounting for different control and explanatory variables were performed to arrive at the final result that an increase on underwriters’ commission fees tends to minimize underpricing, especially considering the Incentive fee category. (Less)
Please use this url to cite or link to this publication:
author
Medeiros de Mattos Brito, Thiago LU
supervisor
organization
course
NEKN02 20191
year
type
H1 - Master's Degree (One Year)
subject
keywords
IPO, Underpricing, Underwriters, Commission Fees, Brazilian Capital Market
language
English
id
8985661
date added to LUP
2019-08-08 10:29:04
date last changed
2019-08-08 10:29:04
@misc{8985661,
  abstract     = {{It is known that underpricing is a widely researched topic worldwide by many different aspects, having instigated studies over the last decades to find reasons in order to explain this phenomenon. However, its relation with banks’ commission fees is still a little explored field, possibly due to the lack of data available to test for this hypothesis. This context raises the following research question: Are underwriters’ commission fees a determinant of IPO underpricing? In Brazil, when companies are willing to raise funds in the stock exchange, they are required to disclose in the IPO prospectus the amount of fees to be paid to underwriters, auditors and attorneys. Based on this available data for the Brazilian market, it will be possible to test the hypothesis of a relation between underpricing and bank’s commission fees, as well as to explore its potential theoretical motivations. Data from 125 Brazilian companies that went public during the period 2007-2018 were collected in order to proceed with this analysis. Multiple linear regressions accounting for different control and explanatory variables were performed to arrive at the final result that an increase on underwriters’ commission fees tends to minimize underpricing, especially considering the Incentive fee category.}},
  author       = {{Medeiros de Mattos Brito, Thiago}},
  language     = {{eng}},
  note         = {{Student Paper}},
  title        = {{The Effect of Banks’ Commission Fees in Brazilian IPOs’ Underpricing}},
  year         = {{2019}},
}