CEO’s Political Connection and Organization Efficiency: Evidence from Public Institutions in Korea

Abstract

This paper investigates whether political connection of Chief Executive Officer (CEO) in public institutions is associated with organization efficiency. We utilize two types of public institutions in Korea, state-owned enterprises (SOEs) and quasi-governmental organizations (QUANGOs). Using the Data Envelopment Analysis (DEA), we find that CEOs with political connection are positively related to organization efficiency. Specifically, such association is largely driven by QUANGOs whose revenue resource is fully funded and owned by the government. It implies that politically connected CEOs can improve firm efficiency when the organizations are financially dependent on the government and are under its stringent monitoring by government. © 2021, The Author(s), under exclusive licence to Springer Science+Business Media, LLC part of Springer Nature.