Directors’ Political Connections and Compliance with Board of Directors Regulations: The Case of S&P/Tsx 300 Companies

Abstract

Further to the various scandals that shook North-American markets in the early 2000s, Canada reacted in 2004 and 2005 by changing its regulations on the governance practices of listed companies. Faccio (2006) and other authors have argued that politically connected companies can have less regulatory oversight than unconnected firms. This affirmation raises an issue that this article attempts to solve, i.e., whether politically connected Canadian companies are less compliant with regulatory requirements on governance than unconnected firms, and with board of directors requirements in particular. Although politically connected and unconnected firms differ significantly in their compliance with regulation, the analyses show that the state of being politically connected tends to have little bearing on regulatory compliance. [PUBLICATION ABSTRACT]