Greater partisan alignment among lawmakers enhances their ability to respond rapidly to adverse shocks, but it also undermines the quality of checks and balances and encourages excessive governmental intervention in local areas aligned with the ruling party. We investigate how this form of local policy risk affects IPO underpricing. One standard-deviation increase in political alignment between local politicians and the federal government translates into an extra $1.58 million being left on the table, which corresponds to 5.39% of the average valuation discount. This effect is concentrated in firms that are vulnerable to legislative interventions and has important long-term implications. Our robustness analysis also shows that our baseline results are not sensitive to the inclusion/exclusion of influential states and years with high IPO activity.

We find that Chief Financial Officers (CFOs) with greater career concerns are more diligent and conservative in preparing financial statements during an Initial Public Offering (IPO). Additional tests exploiting exogenous variation in managerial career concerns suggest that our documented relations are not sensitive to unobservable omitted factors. Furthermore, we document that CFOs who are relatively more concerned about their future job prospects are more sensitive when there is greater scrutiny or higher litigation risk and are less likely to succumb to undue pressures from influential shareholders to exaggerate the firm's prospects. Finally, we show that CFOs with longer decision horizons prefer more transparency during the IPO process, which in turn, translates to superior post-IPO performance and better labor market outcomes than their counterparts. Overall, our findings indicate that career concerns play a disciplining role during IPOs and that CFOs exploit these high-visibility events to accelerate their career trajectory.