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Political Connections and Shareholder Support

Author

Listed:
  • Magnus Blomkvist

    (Audencia Business School)

  • E. Liljeblom
  • A. Löflund
  • E. Redor

    (Audencia Business School)

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.

Suggested Citation

  • Magnus Blomkvist & E. Liljeblom & A. Löflund & E. Redor, 2024. "Political Connections and Shareholder Support," Post-Print hal-04662505, HAL.
    • Handle: RePEc:hal:journl:hal-04662505
    DOI: 10.1111/1467-8551.12760
    Note: View the original document on HAL open archive server: https://hal.science/hal-04662505
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