Corporate Political Connections and the IPO Process: The Benefits of Politically Connected Board Members and Managers

Reza Houston and Stephen P. Ferris

A chapter in International Corporate Governance, 2015, vol. 18, pp 125-163 from Emerald Group Publishing Limited

Abstract: 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.

Keywords: Political connections; investment banking; government policy; government policy and regulation; G24; G34; G38; K21 (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:eme:afeczz:s1569-373220150000018005

DOI: 10.1108/S1569-373220150000018005

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