Opening the Black Box

Abstract: Purpose The purpose of this study is to examine how underwriter reputation, VC-backing and offering size affected the fees paid to underwriters on Nasdaq First North during the time period 01-01-2021 to 31-12-2021. In doing so, the study aims to contribute to a more comprehensive theoretical understanding of the entire cost image associated with going public. Methodology The authors decided to use a quantitative method and a deductive approach to conduct this study. Theoretical perspectives The study is conducted on the basis of previous research regarding underwriting fees, underwriter reputation, venture capital backing, offering size, and initial public offerings. This is combined with the agency, information asymmetry, certification hypothesis and hot market theories. Empirical foundation The empirical data consists of information derived from a sample size of 33 initial public offerings. Information was gathered through a web based self-completion questionnaire. Conclusions The results show that underwriter reputation has a positive significant correlation with and the offering size has a significant negative correlation to the fee paid to underwriters. Venture-capital backing was concluded not to have a significant effect on this fee. Our model was able to explain 49% of the variation in the underwriting fee.