Political Connections and Shareholder Support

Magnus Blomkvist, Eva Liljeblom, A. Löflund and E. Redor ()
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Magnus Blomkvist: Audencia Business School
E. Redor: Audencia Business School

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Abstract: We study investors' preferences for corporate political connections in the U.S. using a novel measure; shareholder votes given to individual directors. We find that, after fully accounting for all firm-year specific information and a wide range of director characteristics, politically connected directors on average do not obtain significantly greater shareholder support. During our sample period (2010-2020), we observe a diminishing popularity of politically connected directors. Political alignment to the incumbent government matters in the sense that Democrat directors are viewed as valuable to shareholders during the Obama administration. However, during Donald Trump's presidency a Democrat party affiliation instead turned into a liability. We also find that shareholders have a stronger preference for politically connected directors in heavily regulated industries, suggesting that board members can alleviate regulatory risk. Our study has implications for director selection and the role of political connections in shaping corporate governance practices.

Keywords: Political Connections; Shareholder Support; Board of Directors; Industry Regulation (search for similar items in EconPapers)
Date: 2024-07
New Economics Papers: this item is included in nep-soc
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Published in British Journal of Management, 2024, 35 (3), ⟨10.1111/1467-8551.12760⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04662505

DOI: 10.1111/1467-8551.12760

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