Work

Polarized corporate boards

Year: 2024

Type: article

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.

Source: Journal of Corporate Finance

DOI: 10.1016/j.jcorpfin.2024.102697

Authors: Thao Hoang, Phong T.H. Ngo, Le Zhang

Institution: Australian National University

Language: English

Topic: Corporate Finance and Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: hybrid

Estimated APC paid: $3,650