Sleeping with the enemy: The perils of having the government on(the)board

We study the causal effect of unsought political connections on firm value. To address concerns potential endogeneity and sample-selection bias we exploit nationalization Argentina's pension system, a unique natural experiment yielding exogenous variation in new connections. find to have large negative value newly connected firms. Yet this result only materializes when, addition becoming shareholder, government also obtains right appoint directors. Decreased stock liquidity or higher volatility do not explain result, suggesting channel that decreases expected cash flows shareholders.