Politically Connected Boards of Directors and the Allocation of Procurement Contracts
Forthcoming Review of Finance
45 Pages Posted: 25 Mar 2008 Last revised: 12 May 2014
Date Written: September 9, 2012
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