We find that the underperformance of IPO stocks relative to the market over a three-year holding period is less severe for IPOs handled by more prestigious underwriters. Consistent with prior studies, we also find that IPOs managed by more reputable underwriters are associated with less short-run underpricing. Among the various existing proxies for underwriter reputation, the Carter-Manaster measure is the most significant in the context of initial returns and also in the context of the three-year performance of IPOs. The study also provides an updated list of the Carter-Manaster measure for various underwriters.A SUBSTANTIAL BODY of work within the initial public offering (IPO) of common stock literature examines the effects of underwriter reputation on the initial performance of IPOs (see, among others, Logue (1973), Beatty and Ritter (1986), Titman and Trueman (1986), and Maksimovic and Unal (1993)). The financial press provides some evidence of the correlation between IPO performance and underwriter reputation (see Forbes June 20, 1994). However, no prior academic work has documented the relation between the long-run performance of IPOs and different proxies for underwriter prestige. This study has two primary objectives. First, it examines the initial returns and the three-year returns following the IPOs and the relationship of those returns with underwriter reputation. Second, the study provides a comparative evaluation of three existing measures of underwriter prestige in the context of initial returns and also in the context of the three-year performance of IPOs.Several proxies for underwriter reputation have been developed in the IPO literature. Logue (1973) and Beatty and Ritter (1986) are among the first to develop a measure of underwriter reputation. Carter and Manaster (1990) use underwriters' relative placements in stock offering "tombstone" announcements. The Carter-Manaster (CM) system is not unlike the starring order appearing in Hollywood's billboards. The compilation of the CM measure is a fairly tedious process because each tombstone has the potential to impact the ordering of each underwriter's relative position in the data bank. On the other hand, the Johnson and Miller (1988) and Megginson and Weiss (1991) measures require less effort to construct. Johnson and Miller (JM) use a modified form of the Carter and Manaster method. JM classify

We examine the association of a venture capital (VC) firm’s reputation with the post-initial public offering (IPO) long-run performance of its portfolio firms. We find that VC reputation, measured by the past market share of VC-backed IPOs, has significant positive associations with long-run firm performance measures. While more reputable VCs initially select better-quality firms, more reputable VCs continue to be associated with superior long-run performance, even after controlling for VC selectivity. We find that more reputable VCs exhibit more active post-IPO involvement in the corporate governance of their portfolio firms, and this continued VC involvement positively influences post-IPO firm performance.

We hypothesize that managers use stock splits to attract more uninformed trading so that market makers can provide liquidity services at lower costs, thereby increasing investors' trading propensity and improving liquidity. We examine a large sample of stock splits and find that, consistent with our hypothesis, the incidence of no trading decreases and liquidity risk is lower following splits, implying a decline in latent trading costs and a reduced cost of equity capital. Further, split announcement returns are correlated with the improvements in both liquidity levels and liquidity risk. Our analysis suggests nontrivial economic benefits from liquidity improvements, with less liquid firms benefiting more from stock splits.

We investigate the pricing of 4,989 equity IPOs with offer dates between 1981 and 2000. Approximately three-fourths of these IPOs have integer offer prices. Average initial returns for IPOs with integer offer prices are significantly higher (24.5%) than those priced on the fraction of the dollar (8.1%). This result is robust through time and after conditioning for other effects known to influence initial returns. We hypothesize that integer vs. fractional dollar IPOs are the result of negotiations between the issuing firm and underwriter. Under this negotiation hypothesis, the frequency of integer pricing should be an increasing function of the offer price and the degree of uncertainty surrounding the value of the firm. Empirical evidence, supportive of the negotiation hypothesis, is presented.

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