Political connections and IPO underpricing: An efficiency problem

Dimitrios Gounopoulos, Konstantinos Kallias, David Newton and Nickolaos Tzeremes

MPRA Paper from University Library of Munich, Germany

Abstract: We frame IPO pricing as an efficiency problem for prospective issuers and explore the effect of connections formed via lobbying and PAC (Political Action Committee) contributions. We develop an approach of general application in finance, where relationships of influence are suspected. Rather than imposing a regression-based framework, we allow relationships to manifest themselves in a data-driven manner. Our analysis reveals nonlinearities between IPO pricing efficiency and the two contribution avenues (justifying the fully nonparametric treatment). We are able to uncover relationships separately according to business sector, which we interpret in terms of varied competitive environments.

Keywords: IPO underpricing; political connections; PAC and lobbying contributions; data envelopment analysis (search for similar items in EconPapers)
JEL-codes: C6 G10 G14 G39 (search for similar items in EconPapers)
Date: 2016-02
New Economics Papers: this item is included in nep-cfn
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:69427

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