Do Companies Benefit from the Revolving Door? Evidence from Companies’ Board Appointments.

The movement of former legislators, regulators, and others with political connections into private-sector roles has emerged as a central aspect of modern governance (Dávid-Barrett, 2020; Mulgan, 2021). Despite its prominence, empirical evidence on the impact of hiring former politicians on corporate performance remains scarce, particularly across diverse geographic and temporal contexts. This research fills this gap by examining board appointments in the world’s largest companies. Board positions indeed offer a strategic opportunity for firms to leverage the insider knowledge of former government officials. To investigate the impact of such appointments, we collect detailed data on board composition from the BoardEx dataset, which includes information on directors' and executives' educational backgrounds, prior employment, professional connections, and demographics. We then combine this data with company performance indicators from the Compustat database, creating a comprehensive dataset with over 3 million executive appointments across roughly 80,000 companies worldwide. This dataset allows us to implement a panel event study design, using company and individual fixed effects, to examine how the appointment of former politicians to corporate boards influences company performance. By comparing board members with government experience to those without, and analysing the same individuals and companies over time, we can isolate the effects of these appointments. Our findings indicate that hiring board executives with prior government experience increases both goodwill and profitability for companies. We further explore the mechanisms driving these effects, examining how former politicians help firms mitigate uncertainty and manage risks. This research offers important insights into the intersection of corporate management and political influence, shedding light on how private firms benefit from public-sector expertise.