Corporate Political Activities and the SEC’s Oversight Role in the IPO Process

Dimitrios Gounopoulos; George Loukopoulos; Panagiotis Loukopoulos; Geoffrey Wood

doi:10.1111/joms.12892

Corporate Political Activities and the SEC’s Oversight Role in the IPO Process

Dimitrios Gounopoulos, George Loukopoulos, Panagiotis Loukopoulos, Geoffrey Wood

University of Strathclyde

Research output: Contribution to journal › Article › peer-review

2 Citations (SciVal)

Abstract

We study how a regulator (Securities and Exchanges Commission; SEC) responds to IPOs that have a higher political profile. We find that IPOs with issuers (intermediaries) that actively pursue political strategies receive more (less) SEC comment letters than IPOs without such actors. Cross-sectional analysis reveals that the IPO's political environment moderates the relationship between social pressure for more corporate transparency and SEC scrutiny. Additional tests indicate that the political activities of issuers (intermediaries) contribute to a less (more) efficient IPO process. Overall, our findings suggest that politically active intermediaries have stronger incentives to accurately portray the IPO financial reporting environment than politically active issuers because they have greater reputational and political capital at stake; quite simply, the former have more to lose. We draw out the implications for theory, in terms of agency and reputation.

Original language	English
Pages (from-to)	375-412
Number of pages	38
Journal	Journal of Management Studies
Volume	61
Issue number	2
Early online date	24 Nov 2022
DOIs	https://doi.org/10.1111/joms.12892
Publication status	Published - 31 Mar 2024

Funding

We are grateful to Xiaowei Luo (the Editor) and four anonymous referee for invaluable reviews. We owe special thanks to Mert Moral for valuable discussions. We also thank Steve Brammer, Thomas Chemmanur, Tim Jenkinson, David Newton, Jay Ritter, participants at the Entrepreneurial Finance (ENTFIN, 2022) Conference, the British Academy of Management Conference (BAM, 2021), and Scottish British Accounting and Finance Association (Scottish BAFA, 2021), and seminar participants at University of Bath for helpful comments and suggestions.

Funders	Funder number
Scottish British Accounting and Finance Association
British Academy of Management

Keywords

Initial Public Offerings (IPOs)
SEC comment letters
Security and Exchanges Commission
agency theory
campaign funding
corporate political activities
financial intermediaries
information asymmetry
political money contributions
reputation theory
state capture

ASJC Scopus subject areas

Business and International Management
Strategy and Management
Management of Technology and Innovation

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10.1111/joms.12892Licence: CC BY

Cite this

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abstract = "We study how a regulator (Securities and Exchanges Commission; SEC) responds to IPOs that have a higher political profile. We find that IPOs with issuers (intermediaries) that actively pursue political strategies receive more (less) SEC comment letters than IPOs without such actors. Cross-sectional analysis reveals that the IPO's political environment moderates the relationship between social pressure for more corporate transparency and SEC scrutiny. Additional tests indicate that the political activities of issuers (intermediaries) contribute to a less (more) efficient IPO process. Overall, our findings suggest that politically active intermediaries have stronger incentives to accurately portray the IPO financial reporting environment than politically active issuers because they have greater reputational and political capital at stake; quite simply, the former have more to lose. We draw out the implications for theory, in terms of agency and reputation.",

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KW - political money contributions

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Corporate Political Activities and the SEC’s Oversight Role in the IPO Process

Abstract

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Keywords

ASJC Scopus subject areas

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