Political ideology of board and CEO dismissal following financial misconduct

Despite criticism from stakeholders, the public, media, and policy makers, many firms do not take serious action against CEOs who have committed financial misconduct. Past studies have suggested that this is due to board structures (e.g., lack of board independence) or situations surrounding misconduct (e.g., severity of misconduct). We propose that political ideology, a set of beliefs and values, held by board members, influences whether firms dismiss their CEOs following financial misconduct. Examining S&P 1500 firms that were involved in financial misconduct, we find that politically conservative boards tend to dismiss their CEOs more often than do liberal boards, offering practical implications for how the ideology of board members can influence critical actions that they take.