Reputation acquisition and abnormal performance in IPO underwriting

We examine how an underwriter's reputation accumulates upon each attempt to take a firm public, conditional on the bank demonstrating abnormal performance bringing—or failing to bring—the offering to market. We develop a novel measure of abnormal underwriting performance by weighing the ex-ante difficulty of completing the offering against the actual outcome. We show this measure positively associates with future changes in the underwriter's market share and issuing volume. The effect manifests as access to more offerings and is prominent when difficult offerings are completed, for abnormal performance demonstrated in midmarket ($20–$100 million) and large IPOs, and for both the primary lead and co‑lead underwriters. Abnormal performance is associated with a higher underwriting spread and aggressive IPO pricing.