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.
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We would like to thank our editor, William Wan, and three anonymous reviewers for their helpful feedback and guidance during the review process. We are also grateful for the constructive comments provided by Amy Hillman, Jerry Goodstein, Nan Jia, Timothy Werner, and Raffaele Conti on earlier drafts of the paper. The first author acknowledges the support of the FCT Portuguese Foundation of Science and Technology for project UID/GES/00407/2019.
© The Author(s) 2019.