Journal of Financial and Quantitative Analysis Vol. 52 No. 6 2017

Political Uncertainty and IPO Activity: Evidence from U.S. Gubernatorial Elections

Gönül Çolak^{1,2,3,4,5,6,7}; Art Durnev^{1,2,3,4,5,6,7}; Yiming Qian^{1,2,3,4,5,6,7}

¹ Florida State University · ² University of Iowa · ³ University of Miami · ⁴ Xiamen University · ⁵ Özyeğin University · ⁶ Hanken School of Economics · ⁷ University of Edinburgh

Abstract

We analyze initial public offering (IPO) activity under political uncertainty surrounding gubernatorial elections in the United States. There are fewer IPOs originating from a state when it is scheduled to have an election. To establish identification, we develop a neighboring-states method that uses bordering states without elections as a control group. The dampening effect of elections on IPO activity is stronger for firms with more concentrated businesses in their home states, firms that are more dependent on government contracts (particularly state contracts), and harder-to-value firms. This dampening effect is related to lower IPO offer prices (hence, higher costs of capital) during election years.

DOI

10.1017/s0022109017000862

Volume

52

Issue

6

Pages

2523-2564

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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