In this study, we examine the relationship between political connections of private firms and the initial public offering process. Using registration statement information, we create a unique database of politically connected IPO firms. We find that political connections are substitutes to high-quality underwriters and big four auditors. Politically connected firms manage earnings more highly upward than non-connected firms prior to the public offering. Politically connected firms also exhibit less underpricing than non-connected firms. Finally, politically connected IPO firms have superior post-IPO returns relative to non-connected IPO firms.
We are grateful for the helpful comments and suggestions by John S. Howe, Dan French, and Raynolde Pereira. We also thank Mary Lynn Davidek for useful editorial suggestions.
Houston, R. and Ferris, S. (2015), "Corporate Political Connections and the IPO Process: The Benefits of Politically Connected Board Members and Managers", International Corporate Governance (Advances in Financial Economics, Vol. 18), Emerald Group Publishing Limited, pp. 125-163. https://doi.org/10.1108/S1569-373220150000018005Download as .RIS
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