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Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan
Political Uncertainty And The Market For Ipos, Jay B. Kesten, Murat C. Mungan
Faculty Scholarship
This Article presents a simple theory and model of the effects of political uncertainty on the market for IPOs. Our model generates four central predictions: (i) increased political uncertainty reduces the frequency of IPOs; (ii) firms that choose to conduct an IPO during periods of political uncertainty are, on average, of higher quality and generate greater return on investment in the secondary market; (iii) political uncertainty increases the cost of capital for IPO firms; but (iv) underpricing is less pronounced during periods of heightened political uncertainty. We demonstrate that each of these predictions is consistent with available empirical evidence.
Our …