Political and Government Connections on Corporate Boards in Australia: Good for Business?

Posted: 29 Jan 2016

See all articles by Stephen Gray

Stephen Gray

University of Queensland - Business School; Duke University - Fuqua School of Business; Financial Research Network (FIRN)

Iman Harymawan

Universitas Airlangga

John Nowland

City University of Hong Kong

Date Written: February 1, 2016

Abstract

While prior studies document the benefits of political connections in emerging markets, their value in developed markets is less certain. In this study, we examine the types of firms that have directors with political and government connections on their boards and the value of these connections to shareholders in Australia, a developed market with low levels of corruption and lobbying, and public funding of election campaigns. We find that directors with political and government connections hold 2.1% of listed company directorships (in 7.7% of listed companies) in Australia. After controlling for director and firm characteristics, we find the market reaction to the appointment of directors with political and government connections is significantly lower than other directors. This is particularly the case for former politicians whose political parties are not in power and who have less political experience. In summary, we find no evidence that political and government connections on corporate boards are particularly abundant or valuable to shareholders in Australia.

Keywords: board of directors, director appointments, director experience, government connections, political connections

Suggested Citation

Gray, Stephen and Harymawan, Iman and Nowland, John, Political and Government Connections on Corporate Boards in Australia: Good for Business? (February 1, 2016). Australian Journal of Management, Vol. 41, No. 1, 2016. Available at SSRN: https://ssrn.com/abstract=2724536

Stephen Gray (Contact Author)

University of Queensland - Business School ( email )

University of Queensland
Brisbane, Queensland 4072
Australia

Duke University - Fuqua School of Business

Box 90120
Durham, NC 27708-0120
United States

Financial Research Network (FIRN) ( email )

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Iman Harymawan

Universitas Airlangga ( email )

JL. Airlangga no 4
Surabaya, East Java 60286
Indonesia

HOME PAGE: http://www.feb.unair.ac.id

John Nowland

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong
China

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