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

76 Pages Posted: 20 Jun 2013 Last revised: 13 Aug 2016

See all articles by Gonul Colak

Gonul Colak

University of Sussex ; Hanken School of Economics

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Yiming Qian

University of Connecticut - Department of Finance

Date Written: August 2, 2016

Abstract

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

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

Gonul Colak

University of Sussex ( email )

Jubilee Building
Falmer
Brighton, BN1 9SN
United Kingdom

Hanken School of Economics ( email )

P.O. Box 479
Arkadiankatu 22
FI-00100 Helsinki, 00100
Finland

Artyom Durnev (Contact Author)

University of Iowa - Henry B. Tippie College of Business ( email )

12348 DEWHURST AVE
HENRICO, VA Henrico 23233-7848
United States
3193831295 (Phone)

Yiming Qian

University of Connecticut - Department of Finance ( email )

2100 Hillside Road U-1041F, Room 452
Storrs, CT 06269
United States
860-486-2774 (Phone)

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