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

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

Gonul Colak

Hanken School of Economics

Art Durnev

University of Iowa - Henry B. Tippie College of Business

Yiming Qian

University of Iowa - 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, Art 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

Hanken School of Economics ( email )

P.O. Box 479
FI-00101 Helsinki, 00101
Finland

Artyom Durnev (Contact Author)

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

Acquisitions
5020 Main Library
Iowa City, IA 52242-1000
United States
(514) 398-5394 (Phone)
(514) 398-3876 (Fax)

HOME PAGE: http://www.artdurnev.com

Yiming Qian

University of Iowa - Department of Finance ( email )

S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)

Paper statistics

Downloads
672
Rank
30,220
Abstract Views
2,184