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Do Some Outside Directors Play a Political Role?

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  • Agrawal, Anup
  • Knoeber, Charles R

Abstract

If outside directors with backgrounds in politics and in law play a political role, they will be more important on the boards of firms for which politics matters more. We conduct three tests. First, for a sample of manufacturing firms, we find that politically experienced directors are more prevalent in firms where sales to government, exports, and lobbying are greater; lawyer-directors are more prevalent in firms where costs of environmental regulation are higher; and both are more prevalent in larger firms. Second, for a sample of electric utilities during the 1990s, when the advent of retail competition made politics more important, we find increased incidence of politically experienced directors. Finally, we explore whether a governmental taste for diversity creates a political role for women directors. Although we document increased incidence of women directors over time, we find little evidence that women directors play a political role. Copyright 2001 by the University of Chicago.

Suggested Citation

  • Agrawal, Anup & Knoeber, Charles R, 2001. "Do Some Outside Directors Play a Political Role?," Journal of Law and Economics, University of Chicago Press, vol. 44(1), pages 179-198, April.
  • Handle: RePEc:ucp:jlawec:v:44:y:2001:i:1:p:179-98
    DOI: 10.1086/320271
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