A new measure for heated negotiation in the IPO syndicate

•This paper develops new measures for heated negotiation within the IPO syndicate.•Key underwriter services are not used as bargaining tools in negotiation.•Heated negotiation arises due to the low compensation for co-managers. This paper develops novel measures for heated negotiation within the IPO syndicate––(i) between the lead underwriter and co-managers and (ii) among co-managers. We find that the inferior bargaining position for the lead underwriter and superior bargaining power for co-managers with initial low compensation for co-managers lead to heated negotiation. Our results indicate that underwriters do not negotiate their shares of compensation based on their pre-commitment and actual provision of key underwriter services. Rather, it appears that heated negotiation materializes as co-managers resist against the lead underwriter's initial unfair profit sharing design.