Geopolitical Risks, Corporate Political Strategies and IPO Performance

Economically, firms in high PAI states are associated with an increase of 4.74% in the value of initial returns to investors. Further, our results suggest that the positive effect of PAI on the value of underpricing concentrates among small, young and non-hard-to-value firms. Additionally, our findings show that different forms of political connections have different effects on the association between political alignment index and initial aftermarket returns. Finally, our study documents that policy risks and related uncertainties are greater during pre-election years and periods surrounding the electoral cycle. The results are robust to various tests and alternative explanations.