IPO initial underpricing anomaly: the election gimmick hypothesis

Adam Zaremba , Radosław Żmudziński


The relationship between political motivations and underpricing of public offerings of privatized companies is to a great extend unexplored field in the global academic literature. In this paper we offer a new explanation for the IPO underpricing anomaly. We formulate the election gimmick hypothesis, which states that in order to please the voters the treasury may be motivated to leave some money on the table during the IPOs of state-owned enterprises. We test the practical implications of the hypothesis. First we review the previous literature, next we perform empirical research based on a filtered sample of 250 IPOs on the Polish market in years 2005–2013. We examine the abnormal returns in the sample and employing some regression – and simulation- -based methods we examine the sources and variation in underpricing. Our findings suggest that the IPOs of state-owned enterprises are more underpriced than remaining ones and that there is more money left on the table in the months preceding elections.
Author Adam Zaremba (WZ / KIiRK)
Adam Zaremba,,
- Department of Investment and Capital Markets
, Radosław Żmudziński
Radosław Żmudziński,,
Journal seriesCopernican Journal of Finance & Accounting, ISSN 2300-1240, e-ISSN 2300-3065, (B 7 pkt)
Issue year2014
Publication size in sheets0.7
Keywords in EnglishIPO underpricing; political cycles; stock market anomalies; Warsaw Stock Exchange
URL http://apcz.umk.pl/czasopisma/index.php/CJFA/article/view/CJFA.2014.025
Languageen angielski
Score (nominal)7
Score sourcejournalList
ScoreMinisterial score = 4.0, 10-12-2019, ArticleFromJournal
Ministerial score (2013-2016) = 7.0, 10-12-2019, ArticleFromJournal
Citation count*7 (2019-02-06)
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* presented citation count is obtained through Internet information analysis and it is close to the number calculated by the Publish or Perish system.
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