The Effect of Political Corruption on IPO Initial Return: A Long-Term Country Analysis

Abstract

We investigate the effect of political corruption on IPO (Initial Public Offering) initial return using a long-term country level data. Using country-level variables spanning 55 countries over a period of more than 10 years, we find a positive relationship between the average political corruption index and the equally weighted average IPO initial return. Country characteristic variables, such as country size, GDP, or the number of IPO firms within each country, do not have a significant effect on the IPO initial return. The result implies political corruption is an important factor affecting IPO initial return.