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  • The consequences of political donations for IPO premium and performance

    Author(s)
    Gounopoulos, D
    Mazouz, K
    Wood, G
    Griffith University Author(s)
    Wood, Geoffery
    Year published
    2021
    Metadata
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    Abstract
    This study explores the effect of directors' political contributions on IPOs' valuation and firm survival. We find that individual contributions by directors bring significant benefits to the IPO firms. Specifically, we show that political contributions of board members, particularly those of CEOs and founders, increase the IPO premium and the survivability of IPO firms. We find that the relationship between directors' political contributions and IPO premium is particularly strong among non-venture-backed firms, while the link between directors' political contributions and firm survival is more pronounced for venture-backed ...
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    This study explores the effect of directors' political contributions on IPOs' valuation and firm survival. We find that individual contributions by directors bring significant benefits to the IPO firms. Specifically, we show that political contributions of board members, particularly those of CEOs and founders, increase the IPO premium and the survivability of IPO firms. We find that the relationship between directors' political contributions and IPO premium is particularly strong among non-venture-backed firms, while the link between directors' political contributions and firm survival is more pronounced for venture-backed firms with strong corporate governance. Our findings are robust to endogeneity concerns and to alternative measures of political donations and IPO performance. Our results confirm the relevance of signaling and resource dependence theories.
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    Journal Title
    Journal of Corporate Finance
    Volume
    67
    DOI
    https://doi.org/10.1016/j.jcorpfin.2021.101888
    Subject
    Banking, Finance and Investment
    Publication URI
    http://hdl.handle.net/10072/402164
    Collection
    • Journal articles

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