What Affects Underwriter Fees?

Using the underwriter fee elements of new bonds securities in the U.S., I add more implications of underwriting market phenomenon to empirical findings in prior literature on the capital-raising market. With respect to issuer-specific characteristics, underwriters receive more compensations for smaller issuer size, higher leverage, and lower performance. With regard to issue-specific characteristics, underwriters demand higher fees for lower-rated issues with non-investment grade, larger issue size, and new offerings in the electronics industry with high litigation risk. The association between underwriter reputation and underwriter fees is not statistically significant. It is possible that the enactment of Gramm-Leach-Bliley Act in 2000 and the subprime mortgage situation in 2005 may lead to underwriter fee discounts.