Political Uncertainty and IPO Activity: Evidence from U.S. Gubernatorial Elections
76 Pages Posted: 20 Jun 2013 Last revised: 13 Aug 2016
Date Written: August 2, 2016
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