Ties That Bind and Grind? Investor Reactions to Politician Appointments to Corporate Boards

Abstract

Although the appointment of politicians to corporate boards is a highly prevalent corporate political strategy, empirical evidence remains inconclusive as to whether and how such appointments create value for firms and their shareholders. Drawing on the director role literature, we argue that politician-directors are likely to serve as valuable resource providers but are less likely to serve as guardians of shareholder interests. In light of this trade-off, investors will infer the expected value of politician appointments on the basis of the director role that they perceive as most needed by a particular firm within the specific institutional context in which it is embedded. We test our predictions using an extensive data set of 345 separate appointment events across 14 countries over a period of 10 years. Our findings show that politician appointments are associated with both resource-provisionary benefits and governance-based costs but that the perceived level of corruption in a country critically conditions both. Specifically, perceived corruption can be seen to function as a double-edged sword that increases both the expected benefits and the expected costs of politician appointments.

Czech Automotive Exports in the Context of the Global Economic Downturn from the Perspective of Statistics

“…In accordance with ecological doctrine, the German automotive industry is undergoing a technological paradigm shift, as electric engines are gradually replacing the combustion engine technology. This transition will make parts of the existing automotive supply chain redundant (more to this topic in [17] - [20]). The COVID-19 pandemic seems to accelerate the transition to this new technology ( [21,22]).…”

Towards a Democratic New Normal? Investor Reactions to Interim‐Regime Dominance during Violent Events

“…Because the stock prices of the focal firms perfectly predict the performance of an Egyptian benchmark index, we used as our benchmark index the MSCI Emerging Market Index, which includes 23 other national stock market indices besides the Egyptian one. In line with prior studies (e.g., El Nayal et al, ), we chose an estimation period starting 285 days and ending 30 days before the start date of the event window of a given spell of violence . The start date of each event window was defined to be the day prior to the reporting on the first instance of violence within the spell.…”

Managerial ties and access to finance in weak institutional contexts: Does CEO duality matter?

“…In emerging countries where market-supporting institutions are imperfect, social relationships are key governance mechanisms (Cao et al, 2016;Ge et al, 2019;Peng, 2003;Wang, Cui, et al, 2020), sources of legitimacy (Nell, Puck, & Heidenreich, 2015) and drivers of competitive advantage (Acquaah, 2007;El Nayal et al, 2021;Sheng et al, 2011). These relationships increase trust, enhance cooperation and facilitate economic exchange (Gulati, 1995;Peng & Luo, 2000).…”

“…Political connections also provide opportunities for politicians to invite firms to participate in foreign trade missions and shape bilateral and multilateral trade pacts (Schuler, Schnietz, & Baggett, 2002). These benefits, provided by political agents, culminate in superior performance (El Nayal et al, 2021) and lead to higher creditworthiness (Pan & Tian, 2020).…”

“…Drawing upon prior research (e.g., Peng & Luo, 2000;White, Boddewyn, & Galang, 2015), we define political ties and financial ties as the extent to which firms' managers develop and maintain informal relationships via personal networks with politicians and managers of financial institutions, respectively. These ties affect not only firms' entrepreneurial capabilities (Guo, Tang, & Wei, 2020;Zhang, O'Kane, & Chen, 2020) and performance (El Nayal, van Oosterhout, & van Essen, 2021;Liu, Yang, & Augustine, 2018;Wang, Shi, Lin, & Yang, 2020), but also their capital structure, such as access to private equity (Batjargal & Liu, 2004) and bank loans (Charumilind, Kali, & Wiwattanakantang, 2006;Pan & Tian, 2020;Yeh, Shu, & Chiu, 2013). For example, research shows that politically connected firms have preferential access to finance (Claessens, Feijen, & Laeven, 2008;Guo, 2019;Khwaja & Mian, 2005;Saeed, Belghitar, & Clark, 2015) and experience little or no collateral requirements (Yeh et al, 2013).…”