What Happens to Listed Firms When Their Managers or Board Members Join Politics?

We examine the consequences of a firm's manager or board members transferring to politics. If social ties with ex-employers can withstand the test of time, the new political powers of former managers and board members would benefit their past companies. If not, these transfers mean losing well-connected and valuable employees, which is detrimental to the concerned companies. Using a new dataset covering listed firms in 11 Central European economies during 2008-2019, we find evidence supporting the latter supposition. Specifically, transfers to politics lower debt dynamics and slow down investment.