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Political connections and seasoned equity offerings

Author

Listed:
  • Nnadi, Modestus I.
  • Sorwar, Ghulam
  • Eskandari, Rasol
  • Chizema, Amon

Abstract

This study examines the impact of political connections on seasoned equity offerings. Using seasoned equity offerings (SEOs) from 2001 to 2018 in the USA, we find that politically connected issuers enjoy a lower cost of seasoned equity issuance than their non-connected counterparts. Our empirical evidence is robust to controls for firm characteristics, corporate governance features, propensity score matching models, and an instrumental variable approach. Moreover, connected issuers conducting primary offerings and those operating in high corrupt states benefitted more from their political connections. Overall, our evidence is consistent with the view that political connections reduce the cost of raising external capital.

Suggested Citation

  • Nnadi, Modestus I. & Sorwar, Ghulam & Eskandari, Rasol & Chizema, Amon, 2021. "Political connections and seasoned equity offerings," Journal of Banking & Finance, Elsevier, vol. 133(C).
  • Handle: RePEc:eee:jbfina:v:133:y:2021:i:c:s0378426621002648
    DOI: 10.1016/j.jbankfin.2021.106312
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    More about this item

    Keywords

    Seasoned equity offerings; Political connections; Gross spread; Shareholder value; Event study;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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