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

We analyze IPO activity under political uncertainty surrounding gubernatorial elections in the U.S. 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.

Keywords: political uncertainty, initial public offerings, gubernatorial elections, IPO pricing

JEL Classification: G32, G38, H70, R50

Suggested Citation: Suggested Citation

Colak, Gonul and Durnev, Artyom and Qian, Yiming, Political Uncertainty and IPO Activity: Evidence from U.S. Gubernatorial Elections (August 2, 2016). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2281269 or http://dx.doi.org/10.2139/ssrn.2281269