UNDERWRITER REPUTATION, INITIAL RETURNS, AND THE LONG-RUN PERFORMANCEOF IPO STOCKS

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 m ore prestigious underwriters. Consistent with prior studies, we also f ind that IPOs managed by more reputable underwriters are associated wi th less short-run underpricing. Among the various existing proxies for underwriter reputation, the Carter-Manaster measure is the most signi ficant in the context of initial returns and also in the context of th e three-year performance of IPOs. The study also provides an updated l ist of the Carter-Manaster measure for various underwriters.