Political power, local policy uncertainty and IPO pricing

Greater partisan alignment among lawmakers enhances their ability to respond rapidly adverse shocks, but it also undermines the quality of checks and balances encourages excessive governmental intervention in local areas aligned with ruling party. We investigate how this form policy risk affects IPO underpricing. One standard-deviation increase political between politicians federal government translates into an extra $1.58 million being left on table, which corresponds 5.39% average valuation discount. This effect is concentrated firms that are vulnerable legislative interventions has important long-term implications. Our robustness analysis shows our baseline results not sensitive inclusion/exclusion influential states years high activity. • study suggests concentration power emanating from shifts U.S. landscape leads greater underpricing initial public offering (IPO) market. table. lacking active corporate strategies, Robustness tests show