From Backroom to Boardroom: Role of Government Directors in U.S. Public Firms and Their Impact on Performance

Abstract:     
We examine the role of government directors (outside directors with government experience) on corporate boards. We find that their board presence does not affect the sensitivity of CEO turnover to performance. They are also more likely to miss board meetings. Further, firms with government directors experience weaker operating performance and more negative merger announcement returns, but their mergers are less likely to be challenged by antitrust authorities. We also find that announcements of government director appointments are greeted more negatively. However, these adverse effects are largely alleviated for firms with high government sales or those operating in regulated industries.

Number of Pages in PDF File: 68

Keywords: corporate governance, board of directors, board effectiveness

JEL Classification: G30, G34, J33

working papers series