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AbstractResearch Question/IssueUsing a unique hand‐collected dataset, this study examines the role of chief executive officer (CEO) educational attainments in relation to newly public firms.Theoretical/Academic ImplicationsUsing human capital, institutional and upper echelon theories, we hypothesize and demonstrate that CEO educational attainments do not unambiguously affect investors' perceptions of a firm's future prospects. Instead, their influence depends on the quality of CEO education as well as on the degree of uncertainty regarding the firm's future performance and the level of information asymmetry between issuers and prospective investors. To our knowledge, this is the first study that provides a comprehensive treatment of the role of CEO education in the IPO context.Research Findings/InsightsWe find that initial public offering (IPO) firms led by CEOs with superior educational credentials—in terms of level and quality—are associated with lower levels of IPO underpricing. This association is mainly driven by CEOs that hold advanced degrees. Notably, a difference‐in‐differences approach based on two quasi‐natural experiments indicates that the impact of CEO education on IPO underpricing is more pronounced within environments characterized by lower information transparency. The baseline results also hold in the longer term, thereby confirming the value of signaling prestigious academic awards at the time of the IPO.Practitioner/Policy ImplicationsOur evidence on the importance of CEO education, and especially that CEOs with varying levels and quality of educational training might differentially affect newly listed firms, is useful to providers of financial capital and boards of directors interested in assessing the viability of new ventures. The implication of our study for IPO investors is that it is worth paying more to take an equity position in firms run by better educated CEOs.

Greater partisan alignment among lawmakers enhances their ability to respond rapidly to adverse shocks, but it also undermines the quality of checks and balances and encourages excessive governmental intervention in local areas aligned with the ruling party. We investigate how this form of local policy risk affects IPO underpricing. One standard-deviation increase in political alignment between local politicians and the federal government translates into an extra $1.58 million being left on the table, which corresponds to 5.39% of the average valuation discount. This effect is concentrated in firms that are vulnerable to legislative interventions and has important long-term implications. Our robustness analysis also shows that our baseline results are not sensitive to the inclusion/exclusion of influential states and years with high IPO activity.