Purpose This study aims to examine the impact of macroeconomic and political-economic variables on the performance of initial public offerings (IPOs) in Iran’s unique economic environment, characterized by extensive government intervention, high inflation and decades of international sanctions. It also examines how economic sanctions affect IPO pricing and short-term returns, especially by comparing the behavior of state-owned and private firms. Design/methodology/approach The research uses empirical analysis to assess the relationship between sanctions intensity (classified into five grades), inflation, gross domestic product and IPO returns. The sample consists of 203 Iranian IPO listed for the years 2006–2021. The period was chosen because it marked the start of privatization, and was classified by sanction intensity and economic cycle. Findings The findings show that higher sanction intensity is associated with stronger short-run IPO return patterns among private firms, which is consistent with more aggressive pricing responses under heightened uncertainty. This pattern is consistent with political-economy perspectives, suggesting that financing choices in crisis settings may be shaped by macro-political constraints. The evidence suggests that during periods of maximum sanctions pressure, private-firm IPOs exhibited stronger return responses than observably state-affiliated firms during high-sanction periods. This pattern is consistent with the possibility that state-owned companies, with greater access to government support and financial resources, used this mechanism less frequently than their private counterparts; however, given ownership measurement limitations, this interpretation should be treated cautiously. Notably, even following the removal of sanctions, elevated IPO return volatility persisted, reflecting either accumulated market uncertainty or market participants’ anticipation of potential future inflation or renewed sanctions. Originality/value To the best of the authors’ knowledge, this study is among the first to analyze the role of sanctions and political-economic factors in Iran’s IPO market. It uniquely highlights the divergent strategies of state-owned and private firms, with private firms exhibiting stronger reactions to sanctions through lower pricing to attract investors. In addition, it provides evidence of inflation-driven pricing behaviors and the lingering effects of sanctions even after their removal. The study suggests that IPO outcomes in high-risk environments may reflect not only conventional financial factors but also broader institutional and macro-political conditions.
ZiaQasemi et al. (Thu,) studied this question.