Polarized Corporate Boards

46 Pages Posted: 29 Jan 2021

See all articles by Thao Hoang

Thao Hoang

Australian National University

Phong T. H. Ngo

Australian National University (ANU)

Le Zhang

Australian National University (ANU) - College of Business and Economics

Date Written: December 12, 2020


Political polarization has increased dramatically in recent decades. Yet, little is known about its economic consequences. Using a large sample of U.S. public firms, we find that polarization between the board of directors and the CEO significantly reduces the likelihood a CEO is fired following poor performance. The mechanism driving this result is an increase in director absenteeism which compromises a board’s monitoring and advising capacity. Finally, we show that polarization in the boardroom ultimately lowers the investment-Q sensitivity. Our findings highlight the real cost of political polarization.

Keywords: Political polarization, Board of directors, CEO turnover, Corporate policy

JEL Classification: P16, G30

Suggested Citation

Hoang, Thao and Ngo, Phong T. H. and Zhang, Le, Polarized Corporate Boards (December 12, 2020). Available at SSRN: https://ssrn.com/abstract=3747607 or http://dx.doi.org/10.2139/ssrn.3747607

Thao Hoang

Australian National University ( email )

Canberra, Australian Capital Territory 2601

Phong T. H. Ngo (Contact Author)

Australian National University (ANU) ( email )

RSFAS, College of Business and Economics
Australian National University
Canberra, Australian Capital Territory 0200
+61 2 6125 1079 (Phone)

HOME PAGE: http://cbe.anu.edu.au/people/rsfas/phong-ngo/

Le Zhang

Australian National University (ANU) - College of Business and Economics ( email )


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