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Navigating policy uncertainty: Politically experienced directors and corporate investment

Author

Listed:
  • Berchtold, Demian
  • Bowler, Blake
  • Brockman, Paul
  • Li, Zhe
  • Tresl, Jiri

Abstract

We examine whether politically experienced independent directors (PEDs) can mitigate the harmful investment effects of policy uncertainty. Our results indicate that the presence of PEDs on corporate boards significantly reduces the sensitivity of investment decisions to policy uncertainty. These effects are particularly pronounced for PEDs with presidential committee experience and concentrated in investments characterized by higher irreversibility. Drawing on political risk premium theory and the real options framework, we design several tests to address endogeneity concerns and rule out alternative explanations. Our findings are consistent with PEDs playing an advisory role that helps firms navigate policy uncertainty when making investment decisions.

Suggested Citation

  • Berchtold, Demian & Bowler, Blake & Brockman, Paul & Li, Zhe & Tresl, Jiri, 2026. "Navigating policy uncertainty: Politically experienced directors and corporate investment," Journal of Corporate Finance, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:corfin:v:99:y:2026:i:c:s0929119926000660
    DOI: 10.1016/j.jcorpfin.2026.103008
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    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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