This paper investigates the empirical significance of underwriter reputation capital by analyzing the impact of initial returns of IPOs on lead-underwriter market value. Consistent with reputation costs, overpriced offerings are associated with a decrease in lead-underwriter market value significantly in excess of estimated direct costs. For moderately underpriced offerings, however, underwriter wealth effects are positive. Consistent with higher reputation costs, these wealth effects are insignificant when the IPO underpricing is more extreme. In jointly managed offerings, it is lead-underwriters that are primarily affected by IPO initial performance.Journal of Economic LiteratureClassification Numbers: G24, G32.

The takeover boom of the 1980s was accompanied by a series of innovations in debt contracts, including the poison put that allows bonds to be redeemed in the event of a corporate control change. The poison put was included in a large majority of convertible debt offerings, shortly after the first issues with such provisions. We attempt to understand the factors that contributed to the widespread adoption of this innovation in convertible bonds and the consequences for shareholder wealth. Our findings suggest that by reducing the potential for bondholder-shareholder conflicts and by conveying positive information about future takeover prospects, poison puts result in significant benefits to issuing firm shareholders, particularly if the firm is under takeover speculation. There are, however, no benefits when a firm has adopted antitakeover measures prior to the offering. There is weaker evidence that existing bondholders do worse when poison puts are present.