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Political Uncertainty and Initial Public Offerings: A Literature Review

Author

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  • Purvi Jhawar

    (Indian Institute of Foreign Trade, Kolkata 700107, India)

  • Jayanta Kumar Seal

    (Indian Institute of Foreign Trade, Kolkata 700107, India)

Abstract

The literature on the influence of political and policy-related uncertainties on financial aspects has gained an impetus in the last two decades. This study adds to the existing literature by reviewing the impact of political uncertainty on initial public offerings (IPOs). We aim to provide a holistic overview of the past research in this domain, identify the potential research gaps, and explore them further. We performed a bibliometric analysis using VOSviewer to identify the major keywords used, the most cited papers, the authors, and the major countries where research in this domain has taken place. Our perspective on the current state of the literature has been threefold. First, considering the importance of market timing in the firm’s decision to go public, it was seen that firms had shown an unwillingness to come up with an IPO during periods of high political uncertainty. Second, political uncertainty has shown its influence in all the phases of the IPO process; however, political connections and donations mitigate this effect. Third, the research in this domain is still at a very nascent stage and is mainly restricted to China and the US. Thus, we believe that there are several areas that are yet to be explored.

Suggested Citation

  • Purvi Jhawar & Jayanta Kumar Seal, 2023. "Political Uncertainty and Initial Public Offerings: A Literature Review," IJFS, MDPI, vol. 11(2), pages 1-17, June.
    • Handle: RePEc:gam:jijfss:v:11:y:2023:i:2:p:74-:d:1165131
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    References listed on IDEAS

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    1. Marco Pagano & Ailsa Röell, 1998. "The Choice of Stock Ownership Structure: Agency Costs, Monitoring, and the Decision to Go Public," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 113(1), pages 187-225.
    2. Allen, Franklin & Faulhaber, Gerald R., 1989. "Signalling by underpricing in the IPO market," Journal of Financial Economics, Elsevier, vol. 23(2), pages 303-323, August.
    3. Désiré Avom & Henri Njangang & Larissa Nawo, 2020. "World Economic Policy Uncertainty and Foreign Direct Investment," Economics Bulletin, AccessEcon, vol. 40(2), pages 1457-1464.
    4. Neupane, Suman & Poshakwale, Sunil S., 2012. "Transparency in IPO mechanism: Retail investors’ participation, IPO pricing and returns," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2064-2076.
    5. Mohsen Bahmani-Oskooee & Majid Maki Nayeri, 2020. "Policy Uncertainty and the Demand for Money in Japan," Review of Economic Analysis, Digital Initiatives at the University of Waterloo Library, vol. 12(1), pages 73-87, April.
    6. Wadhwa, Kavita & Syamala, Sudhakara Reddy, 2023. "Are business groups different from other family firms? Evidence from corporate investments during political uncertainty," Emerging Markets Review, Elsevier, vol. 54(C).
    7. Colak, Gonul & Gounopoulos, Dimitrios & Loukopoulos, Panagiotis & Loukopoulos, Georgios, 2021. "Political power, local policy uncertainty and IPO pricing," Journal of Corporate Finance, Elsevier, vol. 67(C).
    8. Zhou, Kexuan & Kumar, Sanjay & Yu, Linhui & Jiang, Xinlin, 2021. "The economic policy uncertainty and the choice of entry mode of outward foreign direct investment: Cross-border M&A or Greenfield Investment," Journal of Asian Economics, Elsevier, vol. 74(C).
    9. Li, Shi & Zhao, Long, 2021. "Bilateral investment treaties and foreign direct investment: Evidence from emerging market firms," Research in International Business and Finance, Elsevier, vol. 58(C).
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    Cited by:

    1. Wajid Alim & Naqib Ullah Khan & Vince Wanhao Zhang & Helen Huifen Cai & Alexey Mikhaylov & Qiong Yuan, 2024. "Influence of political stability on the stock market returns and volatility: GARCH and EGARCH approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-17, December.

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