Politically Connected Boards of Directors and the Allocation of Procurement Contracts

Goldman, Eitan; So, Jongil; Rocholl, Jörg

doi:10.2139/ssrn.965888

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Politically Connected Boards of Directors and the Allocation of Procurement Contracts

Forthcoming Review of Finance

45 Pages Posted: 25 Mar 2008 Last revised: 13 Sep 2012

See all articles by Eitan Goldman

Eitan Goldman

Indiana University - Kelley School of Business - Department of Finance; European Corporate Governance Institute (ECGI)

Jörg Rocholl

ESMT European School of Management and Technology; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Date Written: September 9, 2012

Abstract

This paper analyzes whether political connections of the boards of directors of publicly traded companies in the United States affect the allocation of government procurement contracts. It focuses on the change in control of both House and Senate following the 1994 election and finds that companies with boards connected to the winning (losing) party experience a significant and large increase (decrease) in procurement contracts after the election. The results remain significant after controlling for industry classifications as well as for several other company characteristics. The findings highlight one of the main avenues through which corporate political connections add value to U.S. companies.

Keywords: Politics, Corporate Governance, Boards, Procurement Contracts

JEL Classification: D21, G14, G30, H20, H57

Suggested Citation: Suggested Citation

Goldman, Eitan and So, Jongil and Rocholl, Joerg, Politically Connected Boards of Directors and the Allocation of Procurement Contracts (September 9, 2012). Forthcoming Review of Finance, Available at SSRN: https://ssrn.com/abstract=965888 or http://dx.doi.org/10.2139/ssrn.965888