Political money contributions of U.S. IPOs

Dimitrios Gounopoulos; Antonios Kallias; Konstantinos Kallias; Panayiotis G. Tzeremes

doi:10.1016/j.jcorpfin.2016.12.011

Political money contributions of U.S. IPOs

Dimitrios Gounopoulos, Antonios Kallias, Konstantinos Kallias, Panayiotis G. Tzeremes

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Abstract

We produce the first study to explore the effect of political money contributions on IPOs. Exploiting a hand-collected database, we show that both lobbying and PAC expenditure pay off on issue day as donors incur less underpricing, an effect that can be amplified by contribution size and strategic targeting of recipients. Investigating the causes in multiple channels, we also associate donor IPOs with negative offer price revisions and lower aftermarket volatility. Collectively, our results offer new empirical grounding to the information asymmetry theory.

Original language	English
Pages (from-to)	19-38
Journal	Journal of Corporate Finance
Volume	43
Early online date	22 Dec 2016
DOIs	https://doi.org/10.1016/j.jcorpfin.2016.12.011
Publication status	Published - 1 Apr 2017

Keywords

initial public offerings
IPO underpricing
political connections

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10.1016/j.jcorpfin.2016.12.011

KALLIASk_2017_cright_JCF_Political money contributions of U.S. IPOsAccepted author manuscript (Post-print), 1.4 MBLicence: CC BY-NC-ND

http://linkinghub.elsevier.com/retrieve/pii/S0929119916303698

Political contributions can play an important role in a successful IPO
Konstantinos Kallias
26/04/17
1 item of Media coverage
Press/Media: Research cited

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title = "Political money contributions of U.S. IPOs",

abstract = "We produce the first study to explore the effect of political money contributions on IPOs. Exploiting a hand-collected database, we show that both lobbying and PAC expenditure pay off on issue day as donors incur less underpricing, an effect that can be amplified by contribution size and strategic targeting of recipients. Investigating the causes in multiple channels, we also associate donor IPOs with negative offer price revisions and lower aftermarket volatility. Collectively, our results offer new empirical grounding to the information asymmetry theory. ",

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AB - We produce the first study to explore the effect of political money contributions on IPOs. Exploiting a hand-collected database, we show that both lobbying and PAC expenditure pay off on issue day as donors incur less underpricing, an effect that can be amplified by contribution size and strategic targeting of recipients. Investigating the causes in multiple channels, we also associate donor IPOs with negative offer price revisions and lower aftermarket volatility. Collectively, our results offer new empirical grounding to the information asymmetry theory.

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KW - political connections

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Political money contributions of U.S. IPOs

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Keywords

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Political contributions can play an important role in a successful IPO

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