Investment banker reputation and two-stage combination carve-outs and spin-offs

This study examines whether investment banker reputation impacts the initial period returns of two stage combinations (carve-outs followed by spin-offs). All prior literature regarding investment banker reputation is based on single-stage events (IPOs). An analysis is conducted of all completed two-stage carve-outs/spin-offs from 1981 to 2002. Findings indicate that underwriters for two-stage combinations retain their reputation in contrast with the single-stage findings of Carter et al. [Carter, R.B., Dark, F.H., Piwowar, M.S., 2002. IPOs and underwriter reputation: Redeeming the value of reputation. Working Paper, Iowa State University] that investment bankers redeemed (cashed-in) their reputation. Also, this study finds that the Carter et al. reputation factors dominate the Loughran and Ritter [Loughran, T., Ritter, J.R., 2002. Why don’t issuers get upset about leaving money on the table in IPOs? The Review of Financial Studies 15 (2), 413–443] reputation factors.