Which politically-connected directors matter more, and where? : Evidence from the cross-section of institutional variations

Firms use former government officials (FGOs) on the board of directors to create external linkage with the government. I examine investors’ perception of FGOs on the board of directors and how institutional environments affect it. Using a large sample of 23,444 hand-collected observations from 31 non-U.S. countries, I show that political directors (PDs) are associated with improved investors’ perception. Drawing from political science literature, I theorize and show that former senior bureaucrats (SBDs), but not former ministers (MDs) or government advisors (ADs), drive the improved investors’ perception. Furthermore, I show that stronger institutional environments, measured by economic freedom, lead to less improved investors’ perception of PDs. Here too SBDs drives my results associated with and economic freedom, but not MDs or ADs, lending support to my initial findings