Corporate Political Activism, Information Transparency, and IPO Compliance Costs

56 Pages Posted: 18 Nov 2021 Last revised: 7 Feb 2022

Date Written: October 22, 2021


Due to their covert and often dubious nature, corporate political activities may encourage or facilitate opportunistic behaviors. Yet, they also subject firms to heightened visibility, which brings greater public and regulatory scrutiny. Using a hand-collected data set of politically connected U.S. IPOs, we investigate how this tension shapes the financial reporting incentives of firms going public and the accompanying direct compliance costs. Consistent with the agency view of corporate political activism (CPA), politically active IPO issuers have worse financial reporting quality, more litigation risk, and eventually pay 30% more accounting fees than their peers. Additional analysis exploiting the U.S. Supreme Court’s landmark ruling on Citizens United vs. Federal Election Commission suggests that the link between CPA and IPO accounting fees is likely to be causal. Finally, our evidence indicates that the involvement of specialized financial intermediaries in the political process has implications for the IPO financial reporting quality.

Keywords: Initial Public Offerings, Political Money Contributions, Corporate Political Activities, IPO Accounting Fees, Audit Pricing, Audit Risk

JEL Classification: G10, G14, G39. M13, M41, M42

Suggested Citation

Gounopoulos, Dimitrios and Loukopoulos, Georgios and Loukopoulos, Panagiotis, Corporate Political Activism, Information Transparency, and IPO Compliance Costs (October 22, 2021). Available at SSRN: or

Dimitrios Gounopoulos (Contact Author)

University of Bath ( email )

School of Management,
Wessex House, Claverton Down
Bath, BA2 7AY
United Kingdom

Georgios Loukopoulos

The Open University ( email )

Walton Hall
Milton Keynes, MK6 7AA
United Kingdom

Panagiotis Loukopoulos

University of Strathclyde ( email )

Curran Building
100 Cathedral Street
Glasgow G4 0LN
United Kingdom

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