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 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.
| Original language | English |
|---|---|
| Article number | 101888 |
| Journal | Journal of Corporate Finance |
| Volume | 67 |
| Issue number | 5 |
| Early online date | 14 Jan 2021 |
| DOIs | |
| Publication status | Published - 30 Apr 2021 |
Keywords
- Firm survival
- IPO
- Offer price
- Political contributions
- Political power
- Resource dependency theory
- Signaling theory
ASJC Scopus subject areas
- Business and International Management
- Finance
- Economics and Econometrics
- Strategy and Management