Polarized corporate boards

Thao Hoang, Phong T.H. Ngo and Le Zhang

Journal of Corporate Finance, 2025, vol. 91, issue C

Abstract: We show that political polarization among directors negatively affects corporate board effectiveness by reducing forced CEO turnover-performance sensitivity. Our results are more pronounced in presidential election years and for firms with more monitoring and advising needs. Polarization also increases the departure likelihood for directors who are ideologically distant from the rest of the board, making boards more politically homogeneous over time. Finally, we show that polarization in the boardroom lowers firms' investment-Q sensitivity and Environmental, Social and Governance (ESG) performance. Our findings highlight the real economic cost of political polarization.

Keywords: Board of directors; Political polarization; Firm policy; Environmental policy (search for similar items in EconPapers)
JEL-codes: G30 G31 G32 M21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:91:y:2025:i:c:s0929119924001597

DOI: 10.1016/j.jcorpfin.2024.102697

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