The revolving door of former civil servants and firm value: A comprehensive approach

Previous studies on the “revolving door” phenomenon primarily focused on politicians and high-ranking civil servants. This paper comprehensively surveys the transition of all ranks of civil servants and political figures into the private sector, investigating the determinants and implications for firm value. Using a comprehensive dataset of former government officials hired by publicly listed firms in Israel from 2007 to 2015, the study reveals that 60% of these firms hire former government officials, constituting 9% of all directors and executives. Findings indicate that firms with higher regulatory burdens are more likely to hire former government officials. Additionally, the appointment of a former government official to a firm's management is associated with an increase in firm value. Notably, the value increase is not dependent on the appointee holding a high-ranking government position. The effect is more significant when the appointee is the first former government official hired by the firm, and it diminishes with the time elapsed since their departure from the political or civil service positions. These results suggest that it is the unique capital accumulated during civil service that impacts firm value, rather than general human capital.