CES

Centre d'Économie de la Sorbonne
UMR 8174

The (Market) Value of State Honors

Stéphane BENVENISTE
Renaud COULOMB
Marc SANGNIER

2025.25
# The (Market) Value of State Honors*

Stéphane Benveniste<sup>a</sup>

Renaud Coulomb<sup>b</sup>

Marc Sangnier<sup>c</sup>

December 2025

## Abstract

State awards to civilians are a widespread social phenomenon across space and time. This paper provides a quantification of the impact of State awards given to Directors on the stock value of their firms. We link a comprehensive dataset of recipients of the *Légion d'honneur*—the most prestigious official award in France—over the 1995–2019 period to Board positions in French listed firms. We document positive abnormal returns in the stocks of recipients' firms at the date of the award. This finding does not apply to those previously identified as politically connected through shared education in elite graduate schools; rather, it is driven by recipients for whom the awards newly signal a valuable access to policy-makers, establishing State awards as a new indicator of political connections.

**KEYWORDS:** Awards, State Honors, Symbolic Capital, Political Connections.

**JEL CODES:** D71, D72, G14, G18.

<footnote>*We are very grateful for comments and suggestions from Yann Bramoullé, Guilhem Cassan, Baptiste Coulmont, Cecilia García Peñalosa, Pauline Grosjean, Sophie Hatte, Nicolas Herault, Arnaud Lefranc, Laura Panza, Akiko Suwa-Eiseinmann, David Thesmar, Louis-André Vallet, Joachim Voth and Ekaterina Zhu-ravskaya, as well as seminar audiences at Luxembourg Institute of Socio-Economic Research, École Normale Supérieure de Lyon, Aix-Marseille University, University of Namur, CREST and Universié Lumière Lyon 2. We thank Arnaud Benveniste, Andrii Kohut, Côme Poirier and Yaroslav Shevchenko for research assistance. The project leading to this publication has received funding from the French government under the “France 2030” investment plan managed by the French National Research Agency (reference: ANR-17-EURE-0020), the Excellence Initiative of Aix-Marseille University - A*MIDEX, the Fonds Wetenschappelijk Onderzoek – Vlaanderen (FWO) and the Fonds de la Recherche Scientifique – FNRS under EOS Project O020918F (EOS ID 30784531).</footnote>

<footnote><sup>a</sup>Centre d'Économie de la Sorbonne (CES), Université Paris 1 Panthéon-Sorbonne, Paris, France and Aix-Marseille University, CNRS, AMSE (Aix-Marseille School of Economics), Marseille, France. ORCID iD: 0009-0005-4740-4066. Mail: stephane.benveniste@univ-paris1.fr.</footnote>

<footnote><sup>b</sup>Mines Paris - PSL, Paris, France. ORCID iD: 0000-0003-3213-8891. Mail: renaud.coulomb@minesparis.psl.eu.</footnote>

<footnote><sup>c</sup>Aix-Marseille University, CNRS, AMSE (Aix-Marseille School of Economics), Marseille, France. ORCID iD: 0000-0001-5681-7747. Mail: marc.sangnier@univ-amu.fr.</footnote>
"Instances may be found, in most courts, of splendid decorations of stars and garters in double and triple range, which do not even give a favourable turn to public opinion. They are considered as proofs of favour, but not as signs of merit."

The Rationale of Reward—Jeremy Bentham, 1830

# 1 Introduction

Prestige and reputation are important routes to influence in social hierarchies, and often appear in physical manifestations such as titles and awards.<fnref n="1" /> Across space, time, and political systems, sovereign entities make great use of these honors through State awards. They appear in Republics (the *Légion d'honneur* in France), constitutional monarchies (the Order of the Garter in the United Kingdom), absolute monarchies (the Order of King Abdulaziz in Saudi Arabia), and in countries with sharply-contrasting political and economic systems (the Presidential Medal of Freedom in the United States, the Order of Kim Il-Sung in North Korea, and the Order of the Republic in China). Although State awards are abundant, inexpensive to distribute, and carry no direct material payoff, it remains unclear what they represent economically and whether and why financial markets value their attribution.

We analyze this question in the context of French listed firms and consider the *Légion d'honneur*, the most prestigious award given by the French Government to civilians. We match the comprehensive list of civilian recipients over the 1995–2019 period to Board positions in French listed firms. We then quantify the value of the *Légion d'honneur* for recipient firms and examine the channels through which this value arises.

Precisely because awards are not distributed randomly, they provide valuable information. Recipients are likely to have specific characteristics that increase their chances of receiving

<footnote n="1">¹These manifestations constitute a flourishing social phenomenon that is present in many sectors (e.g., Arts, Business and the Military). They are bestowed by a large variety of entities such as the general public, experts, Governments and universities (English, 2005 and Best, 2008). There are numerous examples, with titles such as “Doctor”, “Lord”, decorations such as Military medals, or awards such as “Employee of the month” and “Academy Award for Best Director”.</footnote>
a State award, and these characteristics may be correlated with those of the recipients' firms.<fnref n="2" /> However, under the Semi-Strong Efficient Market hypothesis of Fama (1970), all pre-award observable firm and recipient characteristics should already be priced, so any post-award reaction indicates new information on the future performance of the recipients' firms. Following MacKinlay (1997), we use abnormal stock returns to uncover the market's reaction to State awards to Directors.

Our analysis proceeds in two steps. In a first step, we use a short-window event study and show that firms experience positive and significant abnormal returns when one of their Directors receives a *Légion d'honneur*. The average two-day compound abnormal return is 0.21%. Given an average (median) market capitalization of 10.4 billion € (3.5 billion €) at the time of the award (in constant 2000 Euros), this corresponds to an increase in firm value of about 20.8 million € (7.0 million €). Five days after the award, compound abnormal returns reach 0.43%. We conduct falsification tests showing no unusual pre-trends, no reaction when a firm's Directors are not decorated, and no confounding response at dates of other Government-related events. Overall, our results indicate that State awards represent positive news shocks regarding firms' future performance, despite being intended to reward *past* and *observable* merit. The exact channel through which awards increase the stock values of recipients' firms is a *priori* ambiguous. Awards can reflect access to policy-makers for recipients' firms, stimulate recipients' efforts to live up to the expectations of the award, or facilitate their access to resources unrelated to Government activities, all of which may be value-enhancing.

In a second step, we contrast different potential mechanisms, testing the heterogeneity of the market reaction. In line with anecdotal evidence of favoritism surrounding awards (see a news article in *Mediapart*), our analysis reveals that Directors' visible political connections markedly increase their chances of receiving the *Légion d'honneur*. Market participants may

<footnote n="2">²Assortative director-firm matching implies that high-quality Directors tend to join well-performing firms. An approach based on Director hiring, as in Braggion and Moore (2013), would be confounded by firms' strategic timing in recruiting prestigious Directors (Chen et al., 2008). By contrast, our strategy exploits the additional information conveyed by awards received during Directors' tenure on the Board.</footnote>
thus posit that awards signal access to policy-makers. We present evidence that this in-
terpretation is more credible than most alternatives to explain that awards do increase the
value of recipients' firms. Our strategy considers the heterogeneity in the market reaction
by recipients' *ex ante* visible proximity to the Government. Under signalling, the market
should not react to awards attributed to Directors who are already known to be close to
politicians. By way of contrast, any proximity to policy-makers that is revealed or created
by a *Légion d'honneur* is expected to produce positive abnormal returns. We thus con-
struct a proxy of pre-award connections between recipients and politicians. We define a
Director as being connected to the Government if she belongs to the same elite graduate
school cohort as a member of the current central Government. These schools—the *Grandes
Écoles*—are strongly tied to the State (Van Zanten and Maxwell, 2015) and are described
as key elements in the construction of the French elite network (Suleiman, 1978, Bourdieu,
1989 and Kadushin, 1995). We show that the market reaction to awards is positive and
statistically significant only for Directors who do not belong to the same graduation cohorts
as current Government members, i.e., for recipients not visibly connected to policy-makers
before the award. While alternative mechanisms are discussed in Sub-section 4.3, this evi-
dence is consistent with awards signalling new or previously hidden ties between recipients
and politicians. This interpretation is further supported by the fact that *Légion d'honneur*
nominations generate larger abnormal returns when granted early in a legislative term, when
the expected duration of valuable access to political power is longer. By contrast, awards
granted toward the end of a legislative term show no significant market reaction. We further
find stronger market reactions when the business activities of the recipients' firms rely more
on governmental decisions (public expenditure, regulation, and public ownership). Finally,
market reactions to *Légion d'honneur* awards do not spread to other firms in the same indus-
try. If awards primarily signal access of the recipient's firm to policy-makers, this privileged
access does not produce industry-wide advantageous future policies.

The French context provides a number of advantages for the investigation of the value of
official awards to firms. First, the *Légion d'honneur* is a prestigious well-established award, created in 1802 by Napoléon Bonaparte, to recognize individual merit in the civil and Military fields. Second, while still retaining its prestige, there are relatively many civilian *Légion d'honneur* awards each year, about 2,000 on average, with recipients drawn from diverse backgrounds (Arts, Academia, public administration, Business, etc.). Our sample includes 1,074 recipients who received 1,240 awards while serving on the Boards of French listed firms since 1995, spanning 72 distinct *Légion d'honneur* cohorts. Third, attribution rules were stable over 1995-2019: in particular, the names of neither the recipients nor the nominees are disclosed prior to award announcements. We analyze the media coverage of the recipients in the five most-popular daily French newspapers and verify that *Légion d'honneur* awards constitute genuine information shocks. Fourth, awards are discretionary: their attribution is not automatic upon satisfying clear criteria. This leaves room for different interpretations of the reasons behind an award attribution. Ministers and their cabinets play a pivotal role in this process: they identify candidates, prepare and defend individual nomination files, and submit the lists of recipients they support for approval by the President of the Republic. Awards also do not involve any direct material benefit, allowing us to isolate the pure signaling effect of the distinction. Finally, France offers a particularly suitable context to study Directors' ties to politicians, given the strong concentration and interconnection of its elites (Dudouet and Grémont, 2007; Kramarz and Thesmar, 2013). Political and business leaders often share the same elite educational background—the *Grandes Écoles*— which provides a natural proxy for observing Directors' visible proximity to Government members.

Our findings contribute to a number of strands of literature. They first relate to the growing literature on the value of political connections. It has been shown that a firm's political connections are valued by financial markets (see Fisman, 2001, Jayachandran, 2006, Knight, 2007, Ferguson and Voth, 2008, Dube et al., 2011, Coulomb and Sangnier, 2014
and Acemoglu et al., 2016, among others).<fnref n="3" />, <fnref n="4" /> We contribute by introducing State awards as a new manifestation of valuable access to political leaders. Compared to other indicators of political connections, State awards are concomitantly numerous, recurrent, public, and almost free to distribute. We estimate that State awards generate average abnormal returns of 0.21% and 0.43% after two and five days, respectively. By way of comparison, Coulomb and Sangnier (2014) estimated that the victory of Nicolas Sarkozy in the 2007 French Presidential election increased the value of firms to which he was connected by about 3%, with 23 firms considered as connected to the candidate. Using a sample of 157 career changes of top businesspeople becoming politicians (109 elections) and of politicians becoming Directors (48 appointments) in 47 countries, Faccio (2006) estimates that a firm's new connection yields a 5-day cumulative return of 1.43%. While the market reaction to State honors is smaller than for these alternative measures of political connections, their economic significance is amplified by frequency: on average, 50 awards are granted annually to Directors of French listed firms.

Our second contribution is to the recent economic literature on awards, which has considered Business awards given by experts or the Press, such as ‘CEO of the Year’, and has produced mixed evidence regarding their effects on firms’ value.<fnref n="5" />

Positive stock market reactions (Koh, 2003) could reflect favorable information about

<footnote n="3">³Value-creation mechanisms of political connections are well identified in the literature. Politically-connected firms can receive preferential treatment from public institutions (Gordon and Hafer, 2005, Correia, 2014 and Tahoun and van Lent, 2018), obtain more or more-profitable Government contracts (Goldman et al., 2013, Boas et al., 2014 and Baltrunaite, 2020) and enjoy preferential access to finance and bank loans (Khwaja and Mian, 2005, Braggion and Moore, 2013) or financial assistance (Faccio et al., 2006). Connections also generate private benefits (Fafchamps and Labonne, 2017, Folke et al., 2017, Gagliarducci and Manacorda, 2020, Bourveau et al., 2021).</footnote>

<footnote n="4">⁴The literature has used various measures of political connections, such as friendship (Coulomb and Sangnier, 2014 and Bourveau et al., 2021), donations (Ferguson and Voth, 2008, Akey, 2015 and Bourveau et al., 2021), Directors’ experience in politics (Faccio, 2006, Acemoglu et al., 2016 and Bertrand et al., 2018), and employees’ appointments in local Government (Cingano and Pinotti, 2013). Lobbying activities constitute another form of privileged access to policy-makers that have been found to be beneficial for firms (Borisov et al., 2016, Brown and Huang, 2020).</footnote>

<footnote n="5">⁵The literature has also studied individuals’ post-award performance and/or the incentive effect generated by non-financial awards in various contexts: see e.g., Ginsburgh and Van Ours (2003), Brown (2011), Kosfeld and Neckermann (2011), Brunt et al. (2012), Moser and Nicholas (2013), Ashraf et al. (2014), Azoulay et al. (2014), Chan et al. (2014), Neckermann et al. (2014), Borjas and Doran (2015), Gallus (2017), Gneezy and Rustichini (2000), and Ager et al. (2021).</footnote>
Directors' quality (Chen et al., 2022), greater effort by recipients who wish to live up to the award's expectations (Neckermann et al., 2014 and Gallus, 2017), or the reallocation of resources driven by focal attention (the "Matthew effect"; Merton, 1968). However, the award-induced change in status may also improve the recipients' ability to capture firm rev- enues (Malmendier and Tate, 2009), to set up aggressive corporate tax strategies (Kubick and Lockhart, 2017), or to engage in financial misconduct (Li et al., 2020), which can hamper firm performance (Wade et al., 2006). In contrast, our paper is, to the best of our knowl- edge, among the first to estimate the value of State awards on the market capitalization of recipients' firms, alongside the recent contribution by Belot and Waxin (2025), who also study the French Légion d'honneur.<fnref n="6" /> Our work departs from Belot and Waxin (2025) in at least five dimensions. First, we cover the full universe of French listed firms over 1995-2019, whereas they restrict to the 120 largest firms between 1998 and 2019. Second, while they focus only on awards to CEOs, we consider all Directors of listed firms. Third, we ana- lyze the determinants of Légion d'honneur attribution among eligible Directors, including Directors' education and connections to Politicians. Fourth, we collect news articles over the entire period and provide media-based evidence supporting that award announcements constitute information shocks, as recipients' identities are not disclosed in advance. Finally and most importantly, whereas Belot and Waxin (2025) claim that State awards increase political access, our identification of pre-award ties through detailed education-based connec- tions reveals that awards actually raise firm value only in the absence of pre-existing visible connections, suggesting that State awards signal previously hidden political connections.

The remainder of this paper is organized as follows. Section 2 describes the Order of
the *Légion d'honneur* and the award process. Section 3 presents the *Légion d'honneur*
recipients and how we match the awardees to Board positions in French listed firms. It

<footnote n="6">⁶The present paper was first circulated as a working paper in 2022 (Benveniste et al., 2022). Earlier, Raff and Siming (2019) documented higher operating margins for up to 22 firms with domestic CEOs (compared to 9 with foreign CEOs) following the suppression of a Chivalry Order in New Zealand. As only New Zealanders were eligible for the Order, they interpret this pattern as evidence that access to the distinction was detrimental to shareholders.</footnote>
also considers the determinants of *Légion d'honneur* attribution, reviews the media coverage
of the award and awardees, and explains how we measure firms' abnormal returns around
*Légion d'honneur* awards to quantify market reactions. Section 4 presents and discusses the
results, including the underlying mechanisms. Last, section 5 contains concluding remarks.

2 The Légion d'honneur

This section describes the organization of the Order of the *Légion d'honneur*, the recipient nomination and promotion processes, and the prestige that is attached to the award. Online Appendix 2 presents additional details.

## 2.1 History, ranks and cohorts

The *Légion d'honneur* is the most prestigious State decoration in France, and the oldest
still given on behalf of the Head of State. Founded on May 19th 1802 by Napoléon Bona-
parte, it embodies the *Ancien Régime* tradition of awards and titles (e.g., chivalry orders
and ennoblement) and the equality concerns that became more prevalent after the French
Revolution: all citizens, whether from civil society or the Military, regardless of their religion
or whether they are of noble descent, are eligible to receive the *Légion d'honneur* if they
have demonstrated remarkable individual merit serving the nation.

The *Code de la Légion d'honneur* formalizes the organization of the Order, its general
philosophy, the criteria for nomination and promotion, the process of attribution, and poten-
tial penalties. These rules have been remarkably stable over the past six decades, with minor
changes concerning posthumous attribution, foreign recipients, and caps on the number of
recipients. The most substantial change dates from 2007, with the introduction of gender
parity in each *Légion d'honneur* cohort.

The Order of the *Légion d'honneur* includes three ranks and two dignities, with the
following increasing order of prestige: *Chevalier* (Knight), *Officier* (Officer), *Commandeur*
(Commander), *Grand officier* (Grand Officer) and *Grand'croix* (Great Cross).

Abstracting from Military cohorts and special civilian cohorts, there are three annual *Légion d'honneur* cohorts: January 1st, Easter Sunday, and Bastille Day (July 14th). Annual quotas on the number of recipients are set every three years by Presidential decree. A 2018 decree suppressed the Easter cohort and reduced the annual cap on the number of recipients.

## 2.2 Awarding process

As set out in the *Code de la Légion d'honneur*, recipients have to satisfy a series of prerequisites. First, nominees must have exhibited outstanding merit in the service of the nation. There is, however, no formal definition of this merit. Second, they must not have a criminal record. Third, they must be French. Finally, a minimum of 20 years of activity is required. There are no *a priori* restrictions on the field of activity: civilian cohorts include Artists, Academics, Politicians, civil servants, entrepreneurs and private-sector employees.

Entry into the *Légion d'honneur* Order is at the rank of *Chevalier*. Promotions to higher ranks then require subsequent new merit and are only possible after a minimum period in the preceding rank: eight years from *Chevalier* to *Officier*, five years from *Officier* to *Commandeur*, and three years from *Commandeur* to *Grand officier*, or from *Grand officier* to *Grand'croix*.

Individuals cannot request the award for themselves. Propositions for awards are sent to Ministries by Ministers and Secretaries of State themselves, cabinet members, Prefects (the highest administrative representatives of Central Government in the local administrative units of *régions* and *départements*), leaders of unions or professional and social organizations, Members of Parliament and Mayors. Ministers and Secretaries of State write down a case for each nominee that is passed on to the Grand Chancellor of the *Légion d'honneur*. The cases are reviewed to assess the nominees' merits and ensure that they satisfy the selection criteria. The Council of the Order of the *Légion d'honneur* then draws up a secret list of potential recipients that is sent to the President of the Republic for approval. Under the current regulations, the President, who is also the Grand Master of the Order, has the right
to remove names from the list but is not allowed to add any. Nominations and promotions
in the Order are finally set out in a decree and officially published in the *Journal officiel*
*de la République française*. Across all 72 observed cohorts, awards have consistently been
validated by the incumbent administration, even in periods close to elections or Government
transitions.

## 2.3 Non-tangible benefits and prestige

Receiving the civilian *Légion d'honneur* comes with no material rewards or remuneration, and membership cannot be inherited or transferred. The main direct benefit is the prestige it confers. This State-sponsored prestige is partly explained by the exceptional longevity of the *Légion d'honneur*, spanning more than two centuries and surviving a variety of political systems (The Consulate, First Empire, Bourbon Restoration, July Monarchy, Second Republic, Second Empire, Third Republic, Vichy Regime, Fourth Republic, and Fifth Republic). *Légion d'honneur* recipients are often considered to be members of the social elite (Daniel, 1948 and Ihl, 2006). For instance, 35.5% of *Who's Who in France*—a listing of prominent people living in France—profiles mention the *Légion d'honneur* according to search inquiries carried out via *Factiva* on March 16th 2021.

Recipients have the right to wear the Order's insignia and ribbon (see Online Appendix Figure B1) associated with their rank. As shown in Online Appendix Figure B2, a *Légion d'honneur* decoration is systematically worn by the Presidents of the Republic in their official portraits. The low-key ribbons are frequently worn by decorated politicians as distinctive signals in other circumstances, as well as by other awardees as illustrated in Online Appendix Figure B3, which displays photos of some of the CEOs of France's largest listed firms.

As the main reward from the *Légion d'honneur* is prestige and social recognition, the State enforces strict rules regarding the wearing of insignia and ribbons. For instance, unduly wearing a *Légion d'honneur* is punishable by Law, with a sentence of up to one year imprisonment and a fine of 15,000€. The creation of any award that could mislead the
public due to its similarity to official awards is also subject to prosecution.

Public reaction to *Légion d'honneur* awards that are perceived to be unjustified (see, for example, news articles in *Le Point*, *Le Figaro*, *Vanity Fair* and *Le Républicain Lorrain*) and scandals of Politicians or civil servants trading awards for their private interests provide further indirect evidence of the award's prestige.<fnref n="7" /> Anecdotal evidence suggests that awards are sometimes used to reward friends and campaign contributors (see, for example, news articles in *Capital* and *Le Nouvel Observateur*).

To the best of our knowledge, there is no publicly-available comprehensive record of award refusal. Anecdotal evidence suggests that only a very small number of recipients have refused the award after being nominated: the *Wikipedia page on Légion d'honneur refusals* lists only 37 refusals since the creation of the Order, with these being mainly Artists, researchers and intellectuals as discussed in an article in *Le Figaro*.

## 3 Data

In this section we first describe the universe of civilian *Légion d'honneur* cohorts over the 1995–2019 period and the way in which we match recipients to Board positions in French listed firms. We then study the determinants of award attribution, with a focus on Directors’ proximity to politicians that is proxied by their shared background in French elite graduate schools. We next turn to the media coverage of the *Légion d'honneur* cohorts to illustrate that their announcement does indeed constitute an information shock. Last, we describe the measurement of firm abnormal returns at the *Légion d'honneur* dates, which is our measure of the market’s reaction to awards.

<footnote n="7">⁷In 1887, the *Légion d'honneur* trafficking scandal, in which Daniel Wilson—a member of Parliament and son-in-law of the then President of the Republic—was involved, led to the resignation of President Jules Grévy. See Online Appendix Figure B4 for a sample of political cartoons published in *L'Assiette au beurre* at the time of the scandal. Another major scandal occurred in 1926, when it was discovered that a civil servant was selling *Légion d'honneur* nominations. This behavior is now treated as the crime of undue influence peddling.</footnote>
## 3.1 Légion d'honneur recipients in French listed firms

### Légion d'honneur recipients

We collected the universe of civilian *Légion d'honneur* awards from April 1995 to July 2019, excluding extraordinary commemorative cohorts (e.g., sports champions or victims of attacks), by downloading the official decrees from the websites of the *Journal officiel de la République française* and the *Chancellerie de la Légion d'honneur*. We extracted the following recipient information: first and last names, gender, occupation description, the number of years of service, the entity on behalf of which the award is granted (the President of the Republic, the Prime Minister or a Ministry), and whether the award is a nomination to the Order or a promotion to a higher rank. In total, 46,570 decorations were awarded to 43,044 individuals over this period. 37,881 of these (81.3%) were for *Chevalier* appointments, and the remaining 8,689 for promotions to the *Officier, Commandeur, Grand officier* and *Grand'croix* ranks.

Figure 1(a) shows the number of *Légion d'honneur* awards by year (see Online Appendix Figure A1(a) for the number of recipients by cohort). The number of awards varies from one year to another, reflecting different approaches to the distribution of official awards across Governments. Up to 2017, there were three cohorts of an average of 657 recipients per year, so that about 2,000 individuals were either appointed or promoted per annum. From 2018 onwards the Easter cohort was suppressed, and the average cohort size was reduced to 406 (see Online Appendix A for more details).

We use the unformatted occupation information from the official decrees to identify recipients who hold a Business-related job via ad-hoc lists of keywords that categorize occupations in non-mutually exclusive categories. Online Appendix Table A1 lists the 19 occupation categories we created and the share of awards to which they apply. In total, we assign 9,940 awards (21.3% of the total) to individuals in Business-related occupations. As shown in Figure 1(b), the number of Business recipients varies substantially across cohorts, although their
share within each cohort is fairly stable (the standard deviation of this figure is 2.4%). A total of 9,353 recipients are identified as being in Business (with a small number of recipients having more than one award).

## Board composition

Information on the composition of the Boards of French listed firms over time comes from *BoardEx* and *Mint Global* (*Orbis, Bureau van Dijk*). This provides Directors' first and last names, gender, date of birth, and additional data per position held (including start and end dates, status, e.g., executive or non-executive, and the firm's name and identification number). Online Appendix Figure A2(a) plots the monthly number of listed firms with available board-composition data, which averages 870 firms per month over the sample period. There is increasing coverage of Board-composition information over time from both data sources. While in *Mint Global* the number of listed firms starts at a low level, it then rises sharply and finally overtakes the *BoardEx* coverage. On the contrary, *BoardEx* coverage varies less over time, but nonetheless increases from about 200 in 1995 to 480 firms by the end of the observation period. Appendix Figure A2(b) depicts this coverage by plotting the numbers of positions (the numbers of firms × individual) for which information is available in the *BoardEx* and *Mint Global* datasets, suggesting that within-firm coverage is larger in *BoardEx* than in *Mint Global*. Overall, we have incomplete but increasing coverage of Board data, especially for the *Mint Global* source. Online Appendix 3 provides some evidence that this incomplete coverage does not substantially affect our findings, as it does not bias our estimates of the market reaction to *Légion d'honneur* awards.

To account for the same individual holding multiple positions in a firm, we collapse the different job descriptions at the firm × individual × date-level. *BoardEx* finally produces information on 680 firms and 22,379 individuals, with some Board-position information for 22,201 of the latter. On the contrary, *Mint Global* data contain information on 31,742 individuals and 1,674 firms, but has Board-position information for only 21,933 individuals
in 1,635 firms. To maximize Director coverage, we use both information sources to construct the dataset of Board positions.

## Matching *Légion d'honneur* recipients to Board positions

Online Appendix Figure A3 provides a graphical summary of the different steps we followed to match *Légion d'honneur* awards to Board positions. We first use fuzzy matching (Raffo and Lhuillery, 2009) on family names and on first names to link *Légion d'honneur* recipients in Business-related occupations to the individuals who are identified in *BoardEx* and *Mint Global*. We then check the recipient-director matches using the Director biographies available online to minimize the number of false positive matches.<fnref n="8" /> Of the 9,353 *Légion d'honneur* recipients categorized as having a Business-related occupation, 1,877 (20.1%) were able to be linked to an individual record in *Mint Global* and/or *BoardEx*.<fnref n="9" /> Together, they received 2,278 *Légions d'honneur* over the April 1995-July 2019 period.

We next use Board-position information to identify the firms in which *Légion d'honneur* recipients were involved at the time of the award. The final dataset consists of 1,997 individual × firm observations corresponding to 1,240 awards received by 1,074 individuals who were Directors in 409 firms. The 1,240 awards are composed of 818 (66.0%) appointments as *Chevalier* and 422 (34.0%) promotions to higher ranks. On average, each individual is linked to 1.6 firms at the time of *Légion d'honneur* reception or promotion. Conditional on receiving at least one award, the average number of awards indirectly received by a firm over the period is 4.9. This figure does however hide large differences in *Légion d'honneur* exposure: the median number of awards received by recipient firms is 2, while 58 firms received more than 10 *Légions d'honneur* over the 25-year period.

<footnote n="8">⁸We reviewed all of the matches and discarded those due to homonyms by comparing birth year when available, maiden names, middle names and known professional activities. To this end, we used *LinkedIn*, *Wikipedia* and *Who's who in France* entries, the *lesbiographies.com*, *viadeo.journaldunet.com*, *marketscreener.com/business-leaders*, *dirigeants.bfmtv.com*, *dirigeant.societe.com* and *lemoniteur.fr* websites, biographies published by the business newspaper *Les Échos*, and institutional biographies available on firm websites. While individuals' birth year is a decisive indicator of the quality of a match, the information is non-available for 42% of the Directors.</footnote>

<footnote n="9">⁹1,152 (61.4%) were matched to observations in both information sources, 451 (24.0%) to *BoardEx* only and 274 (14.6%) to *Mint Global* only.</footnote>
## 3.2 The determinants of *Légion d'honneur* attribution

This sub-section first takes advantage of the result of the matching between *Légion d'honneur* recipients and people in Business to investigate whether awards in Business differ from other awardees. We then introduce an education-based measure of Directors' political connections to see whether these connections play a role in the attribution of awards. Last, we use information on Board positions to explore whether *Légion d'honneur* recipients are found in firms that are different to others.

### Individuals' characteristics

The left-hand panel of Table 1 separates *Légion d'honneur* recipients matched to *Mint Global* or *BoardEx* by award rank and shows their share of all awards. Directors represent 4% of entries into the Order but up to 11% of the most prestigious grades (*Commandeur*, *Grand officier*, *Grand'croix*). They are also younger than other recipients by 7 years at *Chevalier* and 4 years at *Officier*, as shown in the middle panel. The right-hand panel then reveals that women make up a smaller share of recipients who are Directors than of other awardees.

### Directors' connections to Politicians

In order to investigate whether personal connections between people in Business and Politicians in office help explain *Légion d'honneur* attribution, we construct different proxies for the connections between recipients and Politicians based on their shared background in the most-prestigious French higher education institutions, in the spirit of Kramarz and Thesmar (2013). This approach appeals to the fact that Business and Political elites in France are educated in the same institutions: the *Grandes Écoles* (Suleiman, 1978). An essential dimension of these elite institutions is the small student cohort size as compared to non-elite
Universities or elite institutions in other developed countries.<fnref n="10" /> This helps create an *esprit de corps* within the *Grandes Écoles* (Bourdieu, 1989) and renders them central to the formation of social networks amongst the French elite.

We employ nominative lists of graduates from the 15 most prestigious *Grandes Écoles* (Suleiman, 1978 and Bourdieu, 1989). The main dataset, assembled from alumni associations and institutional libraries, covers 12 elite institutions: École Polytechnique, EM Lyon, ENA, ENS Cachan, ENS Ulm, ESCP, ESPCI, ESSEC, Mines Paris, Ponts et Chaussées, Sciences Po Paris and Télécom Paris. It includes all students born in the 20th century, with 313,858 individuals and 332,491 main-track curricula (excluding PhDs, MBAs, and Executive or specialized Masters). We complement this dataset with 5,960 curricula from three additional institutions for which the full alumni universe was not accessible: École Centrale Paris, ENS Lyon, and HEC. We harvested data directly from their Alumni association websites, restricted to individuals sharing first and last names with Directors of French listed firms (from *BoardEx* and *Mint Global*) or with Government members over 1995–2019.

Information on Government members since 1995 was retrieved from its **official website** and **archives**. We use perfect matching on family names and fuzzy matching on first names to link *Grande École* graduates to Directors in the *BoardEx* and *Mint Global* datasets and to these Government members. We then verify the matches using the same set of recipients' online biographies as listed in footnote 8. As illustrated in Online Appendix Figure A4, 8,222 of the 42,368 (19.4%) Directors in *Mint Global* and *BoardEx* attended one of these 15 elite graduate schools according to the outcome of the matching process. So did 133 out of the 333 (39.6%) members of the Executive (Secretaries of State, Ministers, the Prime Minister and the President) over the 1995–2019 period, and even 12 out of the 15 Presidents of the Republic and Prime Ministers. In comparison, under 1% of French students graduated from these

<footnote n="10">¹⁰There are for example only 51 students per year on average at ESPCI Paris, about 100 at ENA, Mines Paris and ENS Ulm, and no more than 300 at École Polytechnique. Only Sciences Po Paris has significantly larger cohorts, with an average of about 1,500 students. By way of contrast, French universities, as well as most foreign elite institutions, have taken in many more students in recent decades. For instance, about 5,000 students enroll annually at Oxford, Cambridge (Clark and Cummins, 2014) and Harvard.</footnote>
institutions.<fnref n="11" /> 972 out of the 1,877 Directors who received a *Légion d'honneur* graduated from one of the 15 elite institutions. As such, 11.8% of the observed *Grande École* graduate Directors were awarded the *Légion d'honneur* during the period we analyze, as opposed to a figure of only 2.7% for Directors who did not graduate from one of these institutions. This preliminary descriptive evidence suggests that there is a positive correlation between being awarded a *Légion d'honneur* and graduating from an elite institution.

Table 2 decomposes the *Légion d'honneur* awarded to Directors by award rank and the recipients' educational background. In the left part of the table, there are about as many *Grande École* graduates and non-graduates among the *Chevaliers*, despite *Grandes Écoles* graduates being about four times less numerous in the full sample of Directors. Elite-institution graduates are also appointed in the Order significantly sooner than are non-graduates, as shown by the age differences in the right part of Table 2. This difference in age at award date falls and eventually vanishes for the higher ranks, while the proportion of elite institution graduates largely exceeds that of non-graduates. This suggests that elite-institution graduation may be correlated with both the probability and timing of admission and promotion in the Order.

We construct a panel of *Légion d'honneur*-eligible Directors to further investigate how education is related to awards. We assess the eligibility of each of the *Mint Global* and *BoardEx* individuals at each date of a *Légion d'honneur* cohort to see whether they were decorated.<fnref n="12" /> We then estimate a modified Poisson model including time fixed effects of the

<footnote n="11">¹¹According to historical population records and the data collected, the 12 institutions for which we obtained comprehensive lists of graduates accounted for 0.51% of the population of French students over the 1966–1990 period. According to online information, École Centrale Paris (which merged with another institution in 2015), ENS Lyon and HEC currently take in cohorts of about 700, 200 and 400 students respectively, so that the share of French students enrolled in these 15 elite institutions is under 1%.</footnote>

<footnote n="12">¹²We construct eligibility as follows. For never or first-time awarded Directors over the 1995–2019 period, we exploit the eligibility condition of a minimum of 20 years of activity. We consider as eligible: (i) alumni of the 15 *Grandes Écoles* 20 years after they graduated; (ii) non-alumni above 44 (the average age at which alumni are first eligible); and (iii) individuals four years before they first enter a Board (the average time from first known position in a Board and first eligibility of alumni and non-alumni). These rules fail to assess the eligibility of only 5,732 (out of 40,491) never-awarded Directors, whom we remove from the sample. For those awarded before April 1995 and promoted in the Order over the 1995–2019 period, we use the date and rank of the last award compared to the required timespan for promotion between two given ranks, as set out in sub-section 2.2.</footnote>
relationship between *Grande École* graduation and *Légion d'honneur* probability. The risk ratios in column 1 of Table 3 show that *Grandes Écoles* graduates are 3.4 times more likely than non-graduates to be decorated. This figure falls to 2.9 when controlling for age and gender, as shown by the estimated risk ratio in column 2.

We then take information from the CVs and official dates of appointment and resignation of Government members to see whether *Légion d'honneur* awards can be linked to individual-level connections between Directors and Politicians in office. We construct an education-based connection dummy at a *Légion d'honneur* cohort date for the Director having graduated from the same institution as a current member of the Government with at most a one-year difference.<fnref n="13" /> Within-individual variation in this variable is thus driven by changes in the composition of the Government. The cross-cohort average probability that a *Grande École*-graduated Director attended the same institution and graduated at the same time as at least one member of the Government is 34.7%. This dummy is used as an explanatory variable in a regression of the probability of receiving a *Légion d'honneur* in the sample of eligible *Grandes Écoles* graduates. As shown in column 3 of Table 3, the probability that a *Grande École* graduate be awarded the *Légion d'honneur* doubles when at least one member of the Government attended the same elite institution and graduated during the same period. This probability is 61% higher in these periods when accounting for covariates and school fixed effects, as shown in column 4.

We finally isolate the intensive dimension of *Légion d'honneur* attribution decisions by focusing on Directors who both graduated from an elite institution and received a *Légion d'honneur* at some point over the period we analyze. As shown by the estimated risk ratios in columns 5 and 6 of Table 3, the probability of receiving the *Légion d'honneur* rises by about 50% for *Grandes Écoles* graduates in periods when at least one Government member

<footnote n="13">¹³We allow for up to a one-year difference in graduation as the limited size of cohorts and the mentoring of first-year students by second-year students in a number of institutions make it likely that students from adjacent cohorts know each other or share the same network.</footnote>
graduated from the same elite institution at the same time.<fnref n="14" />

Politicians do not make any particular effort to hide these connections, as they do not hesitate to directly reward their *Grandes Écoles* colleagues. We consider the Politicians involved in the attribution of the award to be the President of the Republic, the Prime Minister, and the Ministers and Secretaries of State working in the Ministry that officially attributes the *Légion d'honneur* at the time of the award. The President of the Republic has the final say in excluding potential awardees, the Prime Minister is the most influential politician in the government, and Ministers in the awarding entity set out the case for the potential awardees. Conditional on being connected to at least one of the 36 members of the Executive (on average) in office at a *decree* date, 33.5% of awarded Directors are connected to at least one of the Politicians who were behind the attribution of his or her award.

This analysis shows that our education-based signals of political connections are associated with a greater probability of receiving an award, suggesting that awards may be interpreted by market participants as a sign of proximity with policy-makers. Yet, awards remain largely unanticipated: a *Légion d'honneur* is awarded in only 0.14% of the cases in which a Director is eligible at a cohort date. Although this probability increases to 0.31% for a *Grande École*-graduate and to 0.45% for a connected Director, a *Légion d'honneur*'s announcement remains a news shock.

## Firm characteristics

We first link each firm with a Director who is awarded the *Légion d'honneur* to its size at the time of the award, measured by its stock-market capitalization taken from *Thomson Reuters Datastream*. Figure 2(a) plots the cumulative distribution function of the percentile in the distribution of market capitalizations of firms in which *Légion d'honneur* recipients held positions when they were decorated: Directors in larger firms are more likely to receive the *Légion d'honneur*. The dashed line shows the cumulative distribution function for all of the

<footnote n="14">¹⁴Online Appendix Table A4 shows the estimated risk ratios of interest when using alternative definitions of education-based connections of Business people to members of the Government, imposing the exact same graduation year or allowing the periods of study to only overlap. These more (less) restrictive definitions leave the results qualitatively and quantitatively unaffected.</footnote>
firms that are covered by *Mint Global* or *BoardEx*; this confirms that the over-representation
of large firms amongst recipients' firms does not reflect bias in firm coverage in the data
sources we use to track Board positions (see Online Appendix 3 for more details on Board-
data coverage).

We next investigate whether the firms of award recipients exhibit better market perfor-
mance. Awards may be targeted at outstanding firms, following the spirit of award attribu-
tion, or on the contrary to under-performing firms if awards are used by the Government
to support firms. We thus calculate the past-year change in the stock price of all listed
firms at all *Légion d'honneur* cohort dates. Figure 2(b) plots this distribution for all traded
firms, firms covered by *Mint Global* or *BoardEx*, and the subset of firms with at least one
newly-decorated Director. Directors of firms whose stock prices rose more over the previous
year are more likely to receive the *Légion d'honneur*. The dashed line again indicates that
this result is not driven by firm coverage in *Mint Global* and *BoardEx* according to recent
stock-market performance.

3.3 Media coverage of the *Légion d'honneur*

One important feature of event studies in financial markets is that the events of interest should represent news shocks. This sub-section shows that the media covers cohort recipients only after the relevant decrees have been signed, suggesting that the identity of the upcoming recipients is not known beforehand.

To measure the press coverage of *Légion d'honneur* recipients, we use *Cision Europresse* to retrieve print articles published between January 1st 1995 and November 1st 2019 in the French national daily newspapers *Le Monde*, *Le Figaro*, *Les Échos*, *Libération* and *La Croix*.<fnref n="15" />

We downloaded two sets of articles: the first included 7,720 distinct articles containing the

<footnote n="15">¹⁵There are eight daily national newspapers in France, excluding free newspapers. Three national daily newspapers were excluded from data collection: *L'Équipe*, as it specializes in Sports, as well as *Le Parisien* / *Aujourd'hui en France* and *L'Humanité*, as these last two are only partially covered by *Cision Europresse*. The other five newspapers had large circulations over the 1995-2019 period. According to the *Alliance pour les chiffres de la presse et des médias*, their joint readership was 6.05 million in 2020. As web articles were mostly newsflashes at the beginning of our period of analysis, and as the volume of web articles has increased over the period in an irregular way, we restrict the sample to print articles, the number of which is much more stable over time.</footnote>
keyword “légion(s) d'honneur”; the second consisted of 286,714 distinct articles containing, as a chain of characters, the first and last names of any of the 1,877 recipients who hold or held a Board position in our final sample.

We first compare the date of the news stories mentioning the *Légion d'honneur* to the date of the closest *Légion d'honneur* decree, and measure the average media presence of this award across cohorts each day in a 4-month window around each decree. As shown in Figure 3(a), national newspapers publish on average 1.7 articles per day mentioning the *Légion d'honneur* in the 60 days preceding a decree and over the 6 to 60 days after a decree. By contrast, 5.3, 4.0 and 3.2 articles mentioning the award are published 2, 3 and 4 days after a decree, respectively. This illustrates that the *Légion d'honneur* is an important well-known institution in French society as it appears continuously in the media, with particular extra press coverage for each new cohort. In addition, the 1-day delay before media coverage of the new cohort is consistent with the average gap of 1.6 days between decree signature and publication in the *Journal officiel de la République française*.

We then consider articles about the awardees to show that newspapers explicitly cite them more immediately after they are granted a *Légion d'honneur*. The average daily number of articles per Director mentioning her first and last names before and after the publication in the *Journal officiel* of her *Légion d'honneur* is plotted in Figure 3(b). There are on average 0.06 daily articles (one article every 17 days) per recipient in the 60 days preceding the *Légion d'honneur* decree and 0.05 per day in the 6 to 60 days afterwards. By contrast, there are an average of 0.48, 0.57 and 0.3 daily articles 2, 3 and 4 days after a decree, respectively. There are thus about 10 times more articles mentioning a Director just after her *Légion d'honneur* award as compared to pre-award. The light-grey series in Figure 3(b) focuses on articles that also contain "légion d'honneur", and reveals that almost all of the additional articles concerning Directors post-award also contain this keyword. The increased media presence of recipients post-award is then driven by their receipt of the *Légion d'honneur*.

Overall, the pattern of coverage suggests that the identity of the upcoming awardees
does not appear in the media before the information is officially made public, so that *Légion d'honneur* cohorts' announcements are indeed information shocks.

## 3.4 Measuring the stock-market reaction to the *Légion d'honneur*

Our first objective is to measure the market's reaction to award attribution. We collected the daily stock price of all French listed firms from January 1994 to August 2019 from *Thomson Reuters Datastream*, and follow MacKinlay (1997) by constructing firm abnormal returns following the award of the *Légion d'honneur* to one of its Directors. For each award, we first estimate the relationship between the firm's return and that of the market over a period of 120 trading days (roughly 2 quarters) before the award. We then predict the firm's returns on the day of the decree and over the ensuing 7 days using the estimated market model and the observed market returns. Finally, we define abnormal returns as the difference between the observed and predicted returns. This approach removes any market-wide changes and has been widely used in event studies in finance (see Knight, 2007, Flammer, 2013, Coulomb and Sangnier, 2014, Luechinger and Moser, 2014, Ranco et al., 2015, Acemoglu et al., 2016, Gormley and Matsa, 2016, and Bourveau et al., 2021, among others).

In detail, we run the following regression for each firm *i* in which one of its Directors was decorated with the *Légion d'honneur* on day *t*:

$$ \mathbb{R}_{i\tau} = \alpha_{it} + \beta_{it} \times \bar{\mathbb{R}}_{\tau} + \varepsilon_{i\tau}, \text{ with } \tau \in [t-120, t-1], $$

where $\mathbb{R}_{i\tau}$ is firm *i*'s stock return on day $\tau$, $\bar{\mathbb{R}}_{\tau}$ is the market return on day $\tau$ and $\varepsilon_{i\tau}$ is the error term. We take the SBF 120 index, available from *Thomson Reuters Datastream*, to measure the market return: this is a reference index composed of the 120 most actively-traded stocks on the Paris Stock Exchange. We estimate the above market model separately for each firm and *Légion d'honneur* cohort, yielding the stock × cohort-level estimated parameters $\hat{\alpha}_{it}$
and $\hat{\beta}_{it}$.16 These are then used to calculate the abnormal returns $\tilde{\mathbb{R}}_{i\tau}$ of each firm $i$ on day $\tau$ over the seven following business days:17

$$ \tilde{\mathbb{R}}_{i\tau} = \mathbb{R}_{i\tau} - \{\hat{\alpha}_{it} + \hat{\beta}_{it} \times \tilde{\mathbb{R}}_{\tau}\}, \text{ for } \tau \in [t, t+1, t+2, \dots, t+7], $$

Last, for each $d = 0, \dots, 7$, we calculate the $d$-day compound abnormal returns as:

$$ \tilde{\mathbb{R}}_{it}^{\text{com}} = \prod_{k=0}^{d} (1 + \tilde{\mathbb{R}}_{i,t+k}) - 1. $$

We were able to calculate the market reaction to *Légion d'honneur* awards for 1,865 out of the 1,997 individual × firm observations that make up the final sample.

By construction, abnormal returns at random dates are on average equal to zero, as they represent the error terms from the estimation of returns. If particular events such as award attributions render abnormal returns statistically more likely then these events will contain new information regarding future firm performance. This is in line with the Semi-Strong Efficient Market hypothesis (Fama, 1970), in which all public information is incorporated into prices, so that markets only react to new public information that is relevant for firm valuation. In particular, under the Semi-Strong Efficient Market hypothesis, the validity of our approach—studying abnormal returns at award dates—is not threatened by the fact that recipients and their firms exhibit specific characteristics as documented in sub-section 3.2.

<footnote n="16">16 As shown by Brown and Warner (1985), using this linear market model of returns to estimate abnormal returns is appropriate, even with daily data in which returns and excess returns are non-normal, trading is non-synchronous, daily excess returns are auto-correlated, and variance in excess returns increases on the days around an event. See also MacKinlay (1997) on the appropriateness of the market model for normal returns. Furthermore, the short event period we consider (up to 7 days post-award) makes the choice of the market model for normal returns secondary. As summarized by Fama (1998), “the bad-model problem is less serious in event studies that focus on short return windows (a few days) since daily expected returns are close to zero and so have little effect on estimates of unexpected (abnormal) returns. But the problem grows with the return horizon.”</footnote>

<footnote n="17">17 We use a short event window, as longer horizons reduce the ability to detect abnormal returns (Kothari and Warner, 2007). Our analysis follows standard practice in short-term event studies (Strong, 1992; MacKinlay, 1997; Ding et al., 2018), aiming to capture immediate market responses to discrete events (award attributions). While a balanced sample is more appropriate for analyzing long-term performance (e.g., Acemoglu et al., 2016), it faces major limitations in our context. In particular, predicting the attribution of the *Légion d'honneur* is highly imprecise, as observables have very limited predictive power for awards.</footnote>
We thus calculate the average abnormal returns of firms on the dates at which one of their Directors is decorated to see whether awards do indeed contain new information about future firm performance.

# 4 Results

This section first quantifies the average abnormal returns of recipients' firms in the days following the announcement of a *Légion d'honneur* award to one of their Directors. We then assess the robustness of these results using alternative measures of abnormal returns and several falsification exercises. Next, we explore heterogeneity in the market's reaction across firm, individual, and cohort characteristics, and explore potential mechanisms driving these reactions. Last, we point to a set of complementary heterogeneous findings.

## 4.1 Main results

To quantify the market's reaction to *Légion d'honneur* awards, we compute the average compound abnormal returns at award dates. To take into account the time-varying availability of Board-composition information—see Online Appendix Figures A2(a) and (b)—and the different cohort sizes—see Figures 1(a) and (b)—, we weight observations so that each of the 72 *Légion d'honneur* cohorts contributes equally and cluster standard errors by cohort. Under the assumption that financial markets incorporate all publicly available information, changes in stock prices should reflect only new information about future firm performance (Fama, 1970). News expected to improve (deteriorate) future performance should translate into positive (negative) abnormal returns at the announcement date.

Figure 4 plots the 0-7 days compound abnormal returns of firms following the award of a *Légion d'honneur* to one of their Directors. The market reacts quickly to this information: the point estimate for the 2-day compound abnormal returns is positive and statistically different from zero. The compound abnormal returns rise with the length of time over which
they are compounded, which suggests that markets do not *instantly* fully incorporate this information. This may reflect that decrees are announced with a lag of some days after they are signed.<fnref n="18" /> This delay matches the media coverage of the *Légion d'honneur*, as Figure 3(a) shows that coverage rises significantly two days post-decree. The delay in price adjustment may also reflect that markets need time to acquire additional information in order to interpret award attribution and thus to price the awards.<fnref n="19" />

With the SBF 120 as the market index and a 120-day calibration period to calcu-
late abnormal returns (the baseline), the 2-day compound abnormal returns are 0.21% (p-
value = 0.042). Table 4 illustrates the robustness of this result to changes in the calculation
method: excluding the bottom and top 5 percent of the sample of abnormal returns; allow-
ing the importance of each cohort to depend on the number of observations in that cohort;
calculating compound abnormal returns from the date at which the *Légion d'honneur* de-
cree is officially published in the *Journal officiel de la République française*; restricting the
analysis to cohorts in which the decree was signed on a business day; selecting only stocks
for which a price is available on every day of the calibration period of abnormal returns; and
excluding firms whose Board Members received more than 10 awards since 1995. Excluding
the five cohorts that immediately follow presidential or legislative elections—specifically, the
July 14th cohorts of 1997, 2002, 2007, 2012, and 2017—does not alter our results either.

Online Appendix Table A5 reports 0–7 day compound abnormal returns, using calibration periods of different lengths and either the SBF 120 or the CAC 40 (a capitalization-weighted index of the 40 largest French stocks) as benchmarks. Overall, the pattern of abnormal returns is consistent across these specifications.

<footnote n="18">¹⁸The decree is officially published on average 1.6 days after it is issued. The decree was officially published within two days for 65 (90.3%) of the 72 cohorts we observe, and 3 or 4 days afterwards for only 7 cohorts. Awards can be made public as early as the date at which the decree is officially signed, which is why we use the decree date as the event date in our main approach.</footnote>

<footnote n="19">¹⁹Online Appendix Figure A5 displays compound abnormal returns up to 14 days. While standard errors naturally grow with the time horizon, point estimates are similar when abnormal returns are compounded over 7 to 14 days after the award is announced. This indicates that the increase in the stock value of recipients' firms due to award attribution is completed after about a week and is not short-lived as no reversal of compound abnormal returns is observed.</footnote>
## 4.2 Falsification tests

Figure 5(a) presents the 0-7 days compound abnormal returns of firms observed 7 days before the *Légion d'honneur* decree at which one of these firms' Directors is awarded, and Figure 5(b) the 2-day compound abnormal returns after each of the 7 days preceding the decree. For comparison, the estimate represented by the black dot is the baseline average 2-day compound abnormal return at the decree date. These figures demonstrate that stocks of recipients' firms do not evolve atypically before the decree, so that *Légion d'honneur* decrees are genuine news shocks: there is no systematic information leakage regarding the composition of upcoming cohorts incorporated in recipients' firms stock values.

We next investigate whether the stock prices of firms whose Directors received a *Légion d'honneur* at some date over the 1995-2019 period change at *Légion d'honneur* dates at which their Directors were not awarded. We expect no abnormal returns for these firms on average at these placebo dates.

We first calculate abnormal returns for each civilian *Légion d'honneur* cohort at which a Director was not decorated. We then replicate this analysis for the cohorts in which Directors were not decorated, but which either immediately preceded or followed a cohort in which a firm's Director was awarded. Figure 6(a) plots the corresponding estimates, as well as the average 2-day compound abnormal return at the dates at which firms were awarded (the black dot). The figure shows no significant abnormal returns following *Légion d'honneur* cohorts that do not include any of their Directors.

We then use the *Journal officiel de la République française* and the *FrancePhalerisque.com* website—a private website containing information on French official decorations—to collect all the dates at which *Légion d'honneur* for Military service were awarded over the 1995–2019 period. These Military cohorts do not include Business recipients, and their timing is not the same as that of the civilian cohorts. From these 261 dates, we randomly draw a sample of 72 dates to mimic the frequency of civilian cohorts. We then calculate
the abnormal returns for firms in which at least one Director was awarded a civilian *Légion d'honneur* over the 1995–2019 period following each of these Military cohort dates, as well following the Military cohorts that immediately precede or follow a civilian *Légion d'honneur* cohort in which one of the firm's Directors appears. Figure 6(b) plots the corresponding estimates, and shows that stocks of recipients' firms do not exhibit abnormal returns after the Military cohorts.

We next consider that the President of the Republic gave an address at the time of the *Légion d'honneur* decree or publication in the *Journal officiel* for 31 out of the 72 civilian cohorts we analyze. July 14th and December 31st are dates at which the President frequently makes a public address: it could be that the stocks of awarded firms react to these addresses rather than the awards. This reasoning does, however, require that recipients' firms be expected to benefit more from the policies (if any) announced during these addresses. We take two steps to rule out this possibility. First, we use the *vie-publique.fr* official website to collect the most important dates of public addresses by the Executive power outside of the cohort dates. These cover all the general policy speeches made at the Parliament by Prime Ministers, Presidential interviews on the main TV channel—TF1—, Presidential inaugural statements, and Presidential speeches made before Parliament. There were 87 such events between January 1995 and July 2019. Figure 6(c) plots the abnormal returns of recipients' firms at all of these dates and after political addresses that immediately precede and follow a *Légion d'honneur* cohort in which a firm's Director appears: the stocks of awarded firms vary only little after these addresses.

In a second step, we explore the cross-cohort heterogeneity in the market's reaction at *Légion d'honneur* decree dates, depending on whether there was a Presidential address at the same time. The data from the *vie-publique.fr* official website contain a series of keywords for the July 14th and December 31st Presidential addresses. We qualify an address
as having economic content if at least one keyword relates to Business or Economics.<fnref n="20" /> Online Appendix Figure A6 reproduces our baseline estimates when restricting the sample to cohorts with or without a concurrent public address, or with or without a concurrent address that includes some economic content. We overall observe no significant variations in the market's reactions to awards across these samples. Even if we restrict the sample to cohorts where no address was delivered on the decree's issuance or publication dates, we still find a market reaction to awards similar to that in the baseline. The market's reaction to awards is then not driven by the political addresses that may accompany *Légion d'honneur* announcements.

Last, we take advantage of *Thomson Reuters Datastream*'s industry level-5 classification (129 industries) to select at each cohort date all of the firms that did not have a Director who was awarded but are in the same industry as a firm that did. We then calculate the 0-7 days compound abnormal returns for these non-recipient firms post-decree. The results in Figure 6(d) show that there are no significant abnormal returns for these non-recipients firms. The effect of *Légion d'honneur* awards on recipients' firms does not then spill over to the rest of their industry. As such, there are no industry-wide unobserved events concurrent with *Légion d'honneur* awards that explain recipients' firms abnormal returns. Furthermore, market participants appear not to interpret awards to a Director as a sign of the government's future industrial policy.

## 4.3 Mechanisms

This sub-section examines the mechanisms driving the market's reaction to *Légion d'honneur* awards to Directors of French listed firms. While the available data do not allow us to reach definitive conclusions, we attempt to disentangle several plausible interpretations of the value

<footnote n="20">²⁰ Anecdotal evidence suggests that the July 14th and December 31st addresses traditionally discuss the state of the nation. They do not specifically cover Business or Economic issues, and when they do so they present very broad messages that are difficult to relate to the performance of any specific firms or industries. We categorize addresses as containing some economic information if the address's keyword list contains at least one of the following strings: "onomie" (economy), "emploi" (employment), "fiscalité" (tax), "travail" (labor), "chômage" (unemployment), "dette" (debt) or "deficit" (deficit).</footnote>
of State awards.

Following Fama (1970), positive abnormal returns indicate that awards convey news shocks raising expectations of firms’ future cash flows. On the one hand, awards may increase recipients’ firm value because they are interpreted by the market as a State validation that could consist in a public recognition of a Director’s outstanding ability, or the quality of the governance of the firm. State validation may alternatively indicate recipients’ access to policy-makers. This interpretation is supported by the observed link between political connections and the probability of receiving an award, so that the market may regard a *Légion d’honneur* as a signal of political ties and potential cronyism (see the news articles in Le Point, Capital, Le Parisien, Sud Ouest and Mediapart, among others). It is also supported by the heterogeneity in the market reaction along pre-award political connections documented below. On the other hand, the market reaction to awards may reflect reasons that are not directly linked to Directors’ proximity to the State or the State validation of firms’ or directors’ abilities, such as increased effort, greater resources becoming available due to award prestige that are unrelated to the State, or a simple media stunt effect.

## Media coverage of Directors and their awards

We start by quantifying the extent to which the magnitude of the market reaction to a *Légion d’honneur* award depends on the media visibility of Directors and their awards.

We first consider the pre-award media presence of recipients by counting the number of articles on the awardee in major daily newspapers over the previous year, collected from *Cision Europresse* (see sub-section 3.3). We label recipients as well-known if this number of articles is over the median value of 6. Figures 7(a) and (b) show that awards to lesser-known Directors trigger abnormal returns that are about 2.5 times the size of those of firms with well-known recipients.<fnref n="21" /> Awards thus seem to contain more news when given to recipients

<footnote n="21">²¹ We use a permutation test with 10,000 random reassignments of observations across groups to assess the significance of the difference in two-day compound abnormal returns—see Online Appendix Figure A7(a). The corresponding p-value is 0.09, suggesting a statistically meaningful difference between groups.</footnote>
who are less well-known by market participants.

We then turn to the role of media coverage in transmitting information when awards are announced, via the articles citing the awardees in the 7 days following the official publication of their award. In contrast to pre-award visibility, publicity in the week following the award is associated with a somewhat larger market reaction as shown in Figures 7(c) and (d), but differences are not statistically significant.<fnref n="22" />,<fnref n="23" /> Given the lack of statistical difference in market reaction between the low and high post-award media coverage groups, the possibility that the global market reaction to State awards is due to a pure media stunt unrelated to characteristics the *Légion d'honneur* could signal (talent recognized by policy-makers, proximity to policy-makers, etc.) is unlikely.

Comparing the changes in stock value to the price of an advertising campaign in the same media further reduces the credibility of this interpretation of our main findings. According to the *Syndicat des Régies Publishers*, the price of a commercial ad of a quarter of a page to a full page in one of the national French newspapers was, in 2021, between 12,500€ and 123,000€. Cumulated over the three days after an award, there were in average 1.35 press articles mentioning a firm's Director, against one article every 17 days out of this period. While the average stock in our sample increases by 20.8 million€ after a *Légion d'honneur*, a comparable media stunt through an advertising campaign would cost less than 150,000€. Such imbalance—assuming a *Légion d'honneur* boils down to a media stunt—would translate in a highly dysfunctional market for advertising with demand for ads exceeding the supply for ads.

A second argument against the importance of the media stunt is to be found in the academic literature. Barber and Odean (2008) show that stocks receiving more attention—including through more appearance on the Dow Jones news feed—are subject to more buys

<footnote n="22">²²We use the same permutation procedure as for pre-award coverage. As illustrated by Online Appendix Figure A7(b), the resulting p-value of 0.49 indicates no significant difference between the two groups.</footnote>

<footnote n="23">²³We rely on coverage in generalist outlets, which represent a subset of the information available to market participants, who may also draw on specialized newsletters and professional information services. This may limit our ability to detect heterogeneity in market reactions associated with post-award coverage.</footnote>
than sells by individual investors but that this does not hold for institutional investors that trade much higher volumes. Using daily data on advertising expenditures, Focke et al. (2020) also find that firms are able to boost investors' attention but not the short-term stock value (a comparable result is also found by Madsen and Niessner, 2019). Investors' attention due to media coverage is therefore not expected to affect stock returns.

## Pre-award political connections

We now turn to the question of whether market reactions to awards depend on recipients' pre-award political connections. As set out in sub-section 3.2, these political connections are measured by having graduated from the same *Grande École* with at most a one-year difference as a politician involved in the attribution of the award (the President, the Prime Minister, and the Ministers and Secretaries of State working in the Ministry that officially attributes the *Légion d'honneur*).<fnref n="24" />, <fnref n="25" />

Figures 8(a)–(c) illustrate the 0-7 days compound firm abnormal returns according to whether the recipient is politically-connected before the award receipt. Abnormal returns are positive for firms whose awardees are not *ex ante* connected to the politicians attributing the awards. These non-connected recipients either did not attend one of the 15 *Grandes Écoles*, or did so but not at the same time as the politicians involved in award attribution. There is on the contrary no significant market reaction for firms whose awarded Directors are *ex ante* politically-connected. Online Appendix Figures A10(a) and (b) mirror Figures 8(a)

<footnote n="24">²⁴Graduates from the top French *Grandes Écoles* differ from others, particularly in terms of social background (Benveniste, 2023). Exploiting variation in graduation timing and its overlap with politicians involved in awarding distinctions, we compare stock market reactions to awards received by GE-graduated Directors—among whom unobservable heterogeneity is more limited—according to their connection status. Another test would examine abnormal returns when firms establish new political connections through their Directors, either following the appointment or election of politically connected Directors, or the nomination of Directors linked to politicians already in office. Such an analysis is, however, challenging, as it requires identifying the precise dates of these news shocks (appointments, nominations, or elections), many of which do not coincide with official mandate dates.</footnote>

<footnote n="25">²⁵Lists of graduates and graduation years of individuals are often publicly available and reported by the media. See, for example, news articles in *Le Figaro* and *Paris Match* or in specialized issues such as *La correspondance économique* or *L'Agefi*, as well as an article on *La Jaune & La Rouge*, or even publication of complete lists of graduates in the *Journal officiel de la République française*.</footnote>
and (b), but with a more restrictive connection definition by reducing the graduation window
to the same year as opposed to within one year: the results are little affected by this tighter
definition of political connections.<fnref n="26" />

To assess the significance of differences in abnormal returns at award dates across sub-
samples of recipients based on their political connection status, we conduct a permutation
test. Specifically, we randomly reassign the connection status of each *Grandes Écoles* grad-
uate across 10,000 permutations, while preserving the sizes of the actually connected and
non-connected *Grandes Écoles* alumni groups. For each permutation, we calculated the dif-
ference between the two-day compound abnormal return for non-connected *Grandes Écoles*
graduates and that for connected graduates. We obtain a distribution generated from ran-
dom assignments to groups that we can compare to the actually estimated difference between
the two groups. Appendix Figure A8 displays this comparison and shows that the propor-
tion of placebo differences above the actual estimate is 9.3%, suggesting a low likelihood that
the observed difference in market reactions to awards between connected and non-connected
*Grandes Écoles* alumni arises from random variation.

Awards appear to convey new information about future firm performance only when
recipients are not visibly connected to the attributing politicians beforehand. This het-
erogeneous market reaction cannot easily be reconciled with value-enhancing mechanisms
unrelated to the State, such as greater recipient effort. Instead, it is consistent with the
Semi-Strong Efficient Market hypothesis (Fama, 1970): political connections already known
to the market are priced into stocks (see, e.g., Fisman, 2001; Jayachandran, 2006; Knight,
2007; Ferguson and Voth, 2008; Dube et al., 2011; Coulomb and Sangnier, 2014; Acemoglu
et al., 2016), so that awards to already-connected Directors do not constitute news. In this
sense, State awards may uncover latent invisible connections to policy-makers, or reveal

<footnote n="26"><sup>26</sup> *Légion d’honneur* awards are validated by the incumbent executive. Since major changes in Government composition generally occur after elections (Fabre and Sangnier, 2025), five cohorts in our period (the July 14th cohorts of 1997, 2002, 2007, 2012, and 2017) may partly reflect the previous administration’s choices. Excluding these post-election cohorts, our finding that only newly revealed connections are valued remains unchanged.</footnote>
new ones. A “revolving door” mechanism—in which markets anticipate that politicians will use awards to secure future board positions—could also in principle explain market reactions. Yet our analysis provides little support for this interpretation: only seven members of the Executive later joined firms whose Directors were decorated while they were in office. The heterogeneity in market reactions along pre-award connections also cannot simply be explained by differences in expectations about Directors’ likelihood of receiving an award. While politically connected Directors are indeed more likely to be awarded, awards remain largely unforeseen: on average, an eligible connected Director receives the *Légion d’honneur* only once every 222 cohort announcements.

An alternative interpretation is that market participants may think that awards given to connected Directors are awards reflecting cronyism, and so do not inform about future firm performance. Awards to non-connected Directors, on the contrary, would reward outstanding performance. To explain a market reaction to the latter only, the increase of the Government-sponsored reputation or the new access to the Government signalled by the award should be more pronounced for firms with such outstanding performance. As such, the stocks of firms whose Directors were top performers in the past should be those that react the most to the *Légion d’honneur*. We show below that there is no evidence supporting this interpretation.

## Directors’ pre-award performance

We further examine whether market reactions vary with Directors’ prior performance. While the market and the State may have different perceptions of performance, we consider here the indicators used by the market, as we analyze the post-award movements in stock prices. As markets are forward-looking, we posit that stock-price movements over a given time period will reflect the extent to which the firm’s management affected its expected future cash flows. We use the past change in stock prices to proxy for Directors’ pre-award performance. We take the universe of French listed firms over the 1995–2019 period, and construct the full distribution of their annual change in stock prices prior to each *Légion d’honneur* cohort
date. This provides us with the percentile-rank of firms with awarded Directors at the award
date.

Figures 9(a) and (b) show the abnormal returns for firms of *Légion d'honneur* recipients with annual pre-award stock-price returns above and below the median respectively. Awards given by the State to Directors in firms that out-performed the market produce no market reaction, while the latter is strong for awardees in firms that did recently not perform well in market terms.<fnref n="27" /> Awards can then re-orientate market beliefs regarding less well-performing recipients, and official recognition of past good performance does not produce any reappraisal of future cash flows. A compatible interpretation is that less well-performing Directors who are awarded may then be regarded by the market as close to the Government, and if so this connection would be the news that is priced by the market. This interpretation echoes that given above, that awards are signals of (valuable) access to politicians. Following this line of reasoning, the recognition of outstanding recipient merit does not seem to be the main driver of a market reaction to a State award.<fnref n="28" />

State influence in firms

To provide further support for the interpretation that awards mostly reflect access to the
State, we analyze the heterogeneity in market reaction by the State's influence in the re-
cipients' firms. We consider three channels via which the State can affect a firm: public
expenditure, regulation, and State ownership, and categorize firms into groups according
to their relationship to the State along each dimension.<fnref n="29" /> Online Appendix 4 explains the

<footnote n="27">²⁷As illustrated by Online Appendix Figure A9(a), the p-value associated with the difference in two-day compound abnormal return across the two groups is 0.00.</footnote>

<footnote n="28">²⁸An alternative interpretation is that the market adjusts its priors regarding the future performance of recipients who were not top performers using the newly-public information provided by awards that is orthogonal to the level of access to policy-makers. This interpretation does not seem plausible if we assume that market participants' information about Directors' and firms' characteristics is at least as good as that of politicians.</footnote>

<footnote n="29">²⁹We could expect the marginal benefit of an additional political connection to be smaller for firms that rely more on governmental decisions as they may already be more politically connected. But as their business activities strongly depend on Government decisions, a new connection may bring higher benefits for these firms, thus we can consider that a higher market reaction for awards to Directors from these firms supports that State awards signal access to policy-makers.</footnote>
construction of these groups.

We first consider the share of public expenditure in each industry's production from official French industry-level input-output tables. Figures 10(a) and (b) depict the 0-7 days compound abnormal returns at the award dates for recipient firms in industries with a share of public expenditure below and above the production-weighted median figure. The point estimates are larger for awards to recipients in firms in industries that rely more on public expenditure.

We then consider regulation, and split the sample according to the influence of regulation policies by industry, using data from the OECD's Regulatory Impact index. Figures 10(c) and (d) show that abnormal returns at award dates are larger for recipients in firms in industries that are the most exposed to regulation.

Last, we look at the role of State ownership. We use official reports of public ownership and distinguish between firms that were partly or fully owned by the State over the 1995-2019 period, compared to firms with no history of public ownership. The proximity between recipients and Government members illustrated by awards could be more beneficial for publicly-owned firms. Figures 10(e) and (f) plot the 0-7 days compound abnormal returns by recipients' firms public ownership: the market reaction is larger for recipients in firms with a history of public ownership.

The set of evidence discussed in this sub-section is at best suggestive as it relies on differences in point estimates and not on statistically-significant differences. Even so, it is consistent with awards constituting signals of proximity to policy-makers for recipients whose political connections were not (or were less) visible before the award, and do not represent simple State recognition of past achievements that in turn affects future cash flows. The interpretation that awards constitute a signal of access to policy-makers is corroborated by stronger market reaction for firms whose activities rely more on governmental decisions.<fnref n="30" />

<footnote n="30">³⁰We do not rule out that part of the market reaction reflects the prestige of the award, which may enhance a firm's reputation, access to capital, or ability to attract skilled employees. Prestige may thus play a complementary role, but our findings suggest that political ties remain the dominant channel through which awards increase firms' market value.</footnote>
To further support the interpretation that the market perceives *Légion d'honneur* awards as signals of future access to political power, we analyze how their impact varies depending on the timing of the award within the political cycle. While ministerial reshuffles may occur between elections, Governments in France are accountable to the National Assembly throughout the legislative term and anchored to the tenure of a legislative majority. We classify the awards into those granted early in the cycle, defined as the three early award cohorts in each legislative term, and those granted late, defined as the last three cohorts.<fnref n="31" /> As illustrated by Figures 11(a) and (b), we find that awards granted at the beginning of a legislative term are associated with significantly larger abnormal stock returns, whereas awards granted at the end of a political cycle have no detectable effect.<fnref n="32" /> This supports the view that *Légion d'honneur* awards act as forward-looking signals of access to policy-makers, rather than retrospective rewards for merit or anticipation of revolving-door opportunities. It also suggests that their informational value depends on the perceived durability of the political connection they may reveal, as connections identified early in a term are more likely to yield future returns.

## 4.4 Additional heterogeneity analysis

Online Appendix 5 presents additional analyses that explore heterogeneity across firms, individual characteristics and *Légion d'honneur* cohorts.

The market reaction is stronger for smaller firms, consistent with larger firms being better followed by market analysts (Atiase, 1985, Freeman, 1987 and Shores, 1990), so that managerial characteristics are better-priced for these firms and awards are hence less informative.

<footnote n="31">³¹ We exclude the first cohort of each term, typically announced around July 14, just a few weeks after the formation of a new Government. These very early awards may reflect decisions initiated under the previous administration or the inertia of ongoing bureaucratic processes. As a result, early cohorts correspond to the second to fourth award waves within each legislative term. We also exclude from the cohorts qualified as last of a political term those immediately preceding the 1997 dissolution of the National Assembly, which was unanticipated and therefore could not be interpreted by market participants as marking the end of a political cycle.</footnote>

<footnote n="32">³² As shown by Online Appendix Figure A9(b) that displays the outcome of a permutation test, the p-value associated with the difference across the two groups equals 0.04.</footnote>
Individual characteristics such as social networks may also matter more in smaller firms. However, we do not find that market concentration reinforces the effect: firms operating in less competitive environments (above-median Herfindahl-Hirschman Index) show no greater abnormal returns following an award.

Board members have a multifaceted role in corporate governance, influencing firm decisions, risk management, and overall performance (Yermack, 1996; Coles et al., 2008; Adams et al., 2010; Nguyen and Nielsen, 2010). We therefore examine whether Directors' characteristics shape market reactions to awards. Firms experience no significant market reaction when a female Director receives an award. Besides, we show that abnormal returns are comparable for awards granted to executive and non-executive Directors, and that the market reaction also does not significantly vary with the recipient's level of experience. Both nominations in the Order at the rank of *Chevalier* and promotions to higher ranks generate positive and significant abnormal returns. This can be interpreted as evidence that political connections are not binary but vary in intensity. Accordingly, an initial award would signal the existence of a political tie, while a promotion could indicate a stronger or broader relationship with policy-makers, reflecting more selective access to Government officials. Furthermore, because promotions can be granted only after a minimum waiting period—and given that the average (median) interval between awards is 13.5 (11) years—they typically occur under a different Government than the one conferring the previous award. As such, a promotion may also reveal new or expanded political ties rather than merely confirming pre-existing ones. In the same spirit, we examine whether market reactions differ between a firm's initial and subsequent *Légion d'honneur* awards received by its Directors within a presidential mandate. Both are associated with positive abnormal returns, suggesting that subsequent awards reinforce existing political ties and may also signal connections of other Directors with the same or other Government members. The intensive margin also matters: when several Directors of the same firm are decorated in a single decree, market reactions exhibit higher point estimates. This interpretation is further supported by the positive re-
actions observed not only for first-time decorations at the *Chevalier* level but also for later promotions to higher *Légion d'honneur* grades.

Furthermore, we consider heterogeneity by cohorts, and split the sample by Presidential mandates. The first Presidential term of Jacques Chirac and the Presidency of Nicolas Sarkozy are the core periods when *Légion d'honneur* awards to firms' Directors provided new information to financial markets.<fnref n="33" />, <fnref n="34" /> Finally, the value of a connection may depend on the position and influence of the awarding person or entity. The Ministry of the Economy and Finance, which granted 62% of awards to business Directors between 1995 and 2019, might appear especially important. Yet, market reactions do not differ significantly between awards granted by this ministry, other ministries, or the Prime Minister.

# 5 Conclusion

This paper has investigated the economic value of awards given by policy-makers to individuals in Business. The analysis covers French listed firms and the attribution of the most prestigious French official award—the *Légion d'honneur*—to firms' Directors. We use an exhaustive novel dataset of award recipients in civilian cohorts from April 1995 to July 2019, which we link to data on Board positions. Our paper is among the first to uncover the market value of a State award by looking at the average abnormal stock returns of recipients' firms at the cohort award dates.

We first uncover positive two-day abnormal returns for recipients' firms at award dates

<footnote n="33">³³Heterogeneity in market reactions to awards across mandates may also reflect differences in the economic environment. Low-growth periods were concentrated under the presidencies of N. Sarkozy, J. Chirac, and F. Hollande, with about half of the negative-growth cohorts occurring during N. Sarkozy's mandate. The literature shows that political connections are especially valuable in times of crisis, regulatory upheaval, or major political change (Acemoglu et al., 2016; Akin et al., 2016; Jagolinzer et al., 2020). It is therefore difficult to determine whether the observed heterogeneity reflects political factors or economic conditions shaping the value of awards and connections.</footnote>

<footnote n="34">³⁴The signal conveyed by awards may vary with their selectivity. Using *Journal Officiel* decrees, we reconstruct the legal annual caps on civilian *Légion d'honneur* awards. These caps serve as upper bounds and are generally non-binding, since they often exceed the actual number of awards and are not specific to business recipients (i.e., the share of businesspeople among civilian awardees does also vary over time). Our analysis indicates that market reaction to awards is similar across high- and low-quotas years.</footnote>
of about 0.2 percent in average. *Légion d'honneur* awards are interpreted as positive news shocks regarding recipients' firms future cash flows. This finding is robust to alternative approaches to the calculation of abnormal returns. We also checked that firms with awarded Directors over the 1995-2019 period did not exhibit abnormal returns on the announcement days for the Military *Légion d'honneur* cohorts (which are distinct from the civilian cohort days), civilian cohorts where none of the firm's Directors are awarded, and the dates with political addresses.

We rule out that awards are interpreted as signals of future Government policy, as the rise in the recipients' firm valuation does not spread to other firms in the same industry. We also provide evidence that the market reaction to awards is concentrated in firms whose Directors were, previously to the award, not visibly connected to politicians in power. As such, awards seem to convey new information to the market only when given to Directors who were not previously known to have privileged access to policy-makers, as opposed to those who were educated in French elite institutions simultaneously to politicians in power. Although a *Légion d'honneur* remains an highly unforeseen event, this is consistent with our quantitative analysis of the determinants of awards, as well as anecdotal evidence, showing that political connections increase the probability of award. Last, as access to policy-makers likely matters more for firms that rely more on Government activity, we show that abnormal returns at the award dates are larger for awards given to Directors in industries that rely more on public expenditure, are more heavily-affected by public regulation, and in firms that are subject to State ownership.

Our findings suggest that even the suspicion of favoritism in some award attributions does not alter that awards on average have economic value. This contrasts with Bentham's view expressed in this paper's epigraph.<fnref n="35" /> Awards can have *economic* value precisely because they

<footnote n="35">³⁵ In the same spirit, Claude-Adrien Helvétius wrote "Les honneurs entre les mains des princes ressemblent à ces talismans dont les fées font présent dans nos contes à leurs favoris ; ces talismans perdoient leur vertu sitôt qu'on en faisoit mauvais usage." (Claude-Adrien Helvétius, 1795 – (Euvres complètes) which translates into "Honours in the hands of princes resemble those talismans with which the fairies, according to the fables, were wont to present their favourites: they lose their virtue whenever they are improperly employed." (translation from Jeremy Bentham, 1830).</footnote>
reflect proximity to politicians, rather than any public recognition of past merits. Indeed, it
is firms that performed below the market in the year preceding the award given to one of their
Directors that experience larger abnormal returns at the award date. To place this in the
perspective of Bourdieu's view of symbolic capital as the legitimated form of social, cultural
and economic capital (Bourdieu, 1979), *Légions d'honneur* awarded to Directors seem to
take most of their symbolic value by confirming Directors' *social* capital in their privileged
access to policy-makers. Our results also cast light on why individuals may actively seek
awards during their career, or why firms may have an incentive to pay high-profile Directors
who are closer to Government members.

As State awards, often inspired by the *Légion d'honneur*, are widespread across space and time and because discretionary awarding practices are common for national honours, our framework can be applied to numerous contexts beyond France. Yet the value of such distinctions is likely to be especially pronounced in our context due to the *Légion d'honneur's* exceptional longevity and prestige. Less eminent decorations—such as the French *Ordre national du mérite*—are unlikely to generate market reactions of comparable magnitude (Belot and Waxin, 2025).

Our work has limitations. First, it focuses on the impact of State honors awarded to Di-
rectors on firm value. With additional data—though difficult to obtain—the private benefits
accruing to recipients may be investigated, such as increases in compensation, promotions,
or enhanced career opportunities (Malmendier and Tate, 2009). However, existing evidence
suggests this is unlikely in our setting (Belot and Waxin, 2025). Moreover, the uncovered
increase in firm market value following an award (about €21 million on average) suggests
that most of the award's value accrues to the firm rather than to individual Directors (see
Hermalin and Weisbach, 1998 for a model of bargaining between CEOs and other Directors).
Second, we quantify the value of awards for the recipients' firms, but provide no evidence on
whether awards are detrimental or beneficial to society as a whole. We in particular have
not explored the incentive effects created by awards, nor the positive or negative spillovers
on non-recipients and their social-welfare implications. Third, we have argued that the pos-
itive impact of awards on the stock value of firms whose political ties were not visible ex
ante suggests that awards signal access to policy-makers. However, it remains out of the
scope of this paper to investigate the channels through which recipients' firms may benefit
from their proximity to the Government (e.g., via procurement contracts, subsidies, public
bailouts, access to finance and bank loans). Such channels are anyway already well identi-
fied in the literature (cf. footnote 3). Besides, we define political ties through first-order
education-based connections, as in Kramarz and Thesmar 2013. While this proves effec-
tive at capturing networks, other measures could be exploited, such as weaker second-order
connections via other Directors in the same board, as suggested by the frequency of prior
connections within firms' boards (Cai et al., 2022). Fourth, we only consider award attri-
bution and recipients' firm financial performance. It is however possible that Governments
have their own performance criteria for Directors (perhaps job creation or innovation) that
they use to determine awardees. The analysis of award attribution along these dimensions
would require more-extensive data, and is left for further research. Last, although we have
examined some determinants of award attribution among business Directors, we have only
touched upon broader Government choices such as cohort size and the allocation of awards
across job categories and gender. The analysis of the political economy of award attribution,
as a channel through which the Government communicates with the general public, remains
a fascinating topic for further research.
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<figure><img src="image_1.png" /><figcaption>Figure 1: *Légion d'honneur* recipients by year.</figcaption></figure>

In Figure 1(a), the lines plot the total number of *Légion d'honneur* recipients by year from January 1995 to July 2019. Appointments as *Chevalier* are entries in the Order of the *Légion d'honneur*. Upgrades include promotions to the *Officier*, *Commandeur*, *Grand officier* and *Grand'croix* ranks. The following two modifications were implemented for the graphical representation: first, data points for 2019 are multiplied by 2 to account for the fact that only 1 cohort is observed in 2019 due to our period of analysis, as against 2 in the preceding year; second, the exceptional January 30th 2008 cohort is counted as a 2007 cohort as it corresponds to a postponed cohort, originally set to be announced on December 31st 2007. See Online Appendix Figure A1(a) for the number of recipients by cohort, and Online Appendix Figure A1(b) for the graphical representation by year without the aforementioned modifications. In Figure 1(b), the lines refer to the total number and share of *Légion d'honneur* recipients in Business occupations by cohort from January 1995 to July 2019. See the text for details about the identification of Business occupations.

<figure><img src="image_2.png" /><figcaption>Figure 2: Determinants of the *Légion d'honneur*: Firm size and performance.</figcaption></figure>

Figure 2(a) plots the cumulative distribution of firm size, measured using the firm's percentile in the distribution of the universe of stock-market capitalizations from *Thomson Reuters Datastream* at the date of each *Légion d'honneur* cohort. Figure 2(b) plots the distributions of changes in firms' stock prices over the 365 calendar days preceding each *Légion d'honneur* cohort.
<figure><img src="image_3.png" /><figcaption>Figure 3: Press coverage of *Légion d'honneur* decrees and awarded Directors.</figcaption></figure>

These figures display the daily number (averaged across cohorts) of print newspaper articles published from January 1st, 1995 to November 1st, 2019 in the main national newspapers in France—*Le Monde*, *Le Figaro*, *Les Échos*, *Libération* and *La Croix*—that contain distinctive keywords in the text. These articles were retrieved using *Cision Europresse*. We relate the date of publication of each article to that of the closest *Légion d'honneur* decree, which serves as the reference day. We average the daily number of press articles before or after the reference day across *Légion d'honneur* cohorts. Figure 3(a) shows the average number of press articles containing the keyword "*Légion(s) d'honneur*". Figure 3(b) shows the cross-individual average number of press articles that contain the first and last names of a Business Director who is also a *Légion d'honneur* recipient and the cross-individual average number of press articles that contain an awarded-Director's first and last names together with "*Légion(s) d'honneur*".
<figure><img src="image_4.png" /><figcaption>Figure 4: Firms' compound abnormal returns following the award of a *Légion d'honneur*.</figcaption></figure>

The figure plots the average *t*-day compound abnormal return at cohort dates (*t* between 0 and 7) of stocks of firms in which at least one Director was awarded in the cohort. See the main text for details. Observations are positions (firms × individual) at each cohort date. Each cohort has the same weight. Standard errors are clustered at the cohort level. See Online Appendix Table A5 for the associated point estimates.

<figure><img src="image_5.png" /><figcaption>Figure 5: Compound abnormal returns of *Légion d'honneur* awarded firms 7 days before the award, and 2-day compound abnormal returns 7–1 days before the award.</figcaption></figure>

Each cohort has the same weight. Standard errors are clustered at the cohort level. Figure 5(a) plots the average *t*-day compound abnormal return of awarded firms *t* days before the cohort decree dates at which one of the firm's Directors will be awarded (*t* between 0 and 7). See the main text for details. Figure 5(b) plots the 2-day compound abnormal return of awarded firms in the 7 to 1 days preceding the decree date at which one of the firm's Directors will be awarded and the 2-day compound abnormal return at the decree date (the black dot).
<figure><img src="image_6.png" /><figcaption>Figure 6: 2-day compound abnormal returns of *Légion d'honneur* awarded firms following other civilian *Légion d'honneur* cohorts, Military *Légion d'honneur* cohorts and public addresses; and compound abnormal returns of same-industry firms following the award of a *Légion d'honneur*.</figcaption></figure>

Observations are positions (firms × individual) at different dates. Each cohort has the same weight. Standard errors are clustered at the cohort level. Figure 6(a) displays the average 2-day compound abnormal return of stocks of firms that receive a *Légion d'honneur* over the 1995-2019 period at civilian cohort dates at which none of their Directors receives an award. Figure 6(b) displays the average 2-day compound abnormal return of stocks of firms that receive a civilian *Légion d'honneur* over the 1995-2019 period with abnormal returns estimated at Military cohort dates. Figure 6(c) displays the average 2-day compound abnormal return of stocks of firms that receive a *Légion d'honneur* over the 1995-2019 period at non-cohort dates at which the President of the Republic or the Prime Minister delivered a public address. Figure 6(d) plots the 0 to 7-day compound abnormal return at decree dates of all firms with no Directors awarded at these dates but that are in the same industry as firms with a Director awarded at these dates. See the main text for more details.
<figure><img src="image_7.png" /><figcaption>Figure 7: Firms' compound abnormal returns following the award of a *Légion d'honneur* according to Directors' media coverage.</figcaption></figure>

Observations are positions (firms × individual) at each cohort date. Each cohort has the same weight. Standard errors are clustered at the cohort level. We consider for each recipient the number of articles citing the recipient's first and last names in the 365 days before (pre-award coverage) and in the 7 days after (post-award coverage) the recipient's award. See sub-section 3.3 for the details of the construction of the number of Directors' cites in newspaper articles. Figure 7(a) uses 964 positions of recipients with a pre-award coverage below or equal to the median. The median number of articles containing the first and last names of a *Légion d'honneur* recipient in the 365 days preceding the award is 6. Figure 7(b) uses 901 positions of recipients with a pre-award coverage above the median. Figure 7(c) uses 1,099 positions of recipients with a post-award coverage below or equal to the median. The median number of articles containing the first and last names of a *Légion d'honneur* recipient in the 7 days following the award is 1. Figure 7(d) uses 766 positions of recipients with a post-award coverage above the median of recipients.
<figure><img src="image_8.png" /><figcaption>Figure 8: Firms' compound abnormal returns following the award of a *Légion d'honneur*, by graduation and connection statuses of awarded Directors.</figcaption></figure>
<figure><img src="image_9.png" /><figcaption>Figure 9: Firms' compound abnormal returns following the award of a *Légion d'honneur* to its Directors by firm performance in the year preceding the award.</figcaption></figure>

Observations are positions (firms × individual) at each cohort date. Each cohort has the same weight. Standard errors are clustered at the cohort level. We measure firm performance by the percentile-rank (among all firms publicly listed in France) of the firm's stock return over the 365 calendar days (about 250 traded days) preceding the attribution of a *Légion d'honneur* to one of the firm's Directors. The median percentile-rank is 58. Figure 9(a) uses positions of Directors of firms below the median percentile-rank (823 observations). Figure 9(b) uses positions of Directors of firms above the median percentile-rank (861 observations). For these estimations, compound abnormal returns are calculated using a calibration period of 14 instead of 120 days. This helps to mitigate the issue that, when the calibration period significantly overlaps with the period over which firm performance is calculated, the heterogeneity in pre-award firm performance is captured by the market model of firm returns (see sub-section 3.4) which creates artefactual market reaction at the decree dates. For instance, top-performing firms before the award are expected to over-perform the market after the decree. This would lead to top-performing firms having negative abnormal returns and low-performing firms positive abnormal returns, even if the observed raw stocks of high- and low-performing firms exhibit the same movements.
<figure><img src="image_10.png" /><figcaption>Figure 10: Firms’ compound abnormal returns following the award of a Légion d’honneur, by the State’s influence on firms. (Documents de travail du Centre d’Economie de la Sorbonne - 2025.25)</figcaption></figure>

Observations are positions (firms × individual) at each cohort date. Each cohort has the same weight. Standard errors are clustered at the cohort level. Figures 10(a) and 10(b) use positions of Directors of firms in industries with a share of public expenditure in production below or above the median of shares of public expenditure in total production across industries (942 and 812 observations). Figures 10(c) and 10(d) use positions of Directors of firms in industries below or above the median of OECD's Regulatory Impact indicator across industries (923 and 942 observations). Figures 10(e) and 10(f) use positions of Directors of firms without or with a history of public ownership over the 1995–2019 period (1,545 and 320 observations). See Online Appendix 4 for details regarding the construction of the groups.
<figure><img src="image_11.png" /><figcaption>Figure 11: Firms' compound abnormal returns following the award of a *Légion d'honneur*, by timing within the political cycle.</figcaption></figure>

The figure plots the average *t*-day compound abnormal return at cohort dates (*t* between 0 and 7) of stocks of firms in which at least one Director was awarded in the cohort. See the main text for details. Observations are positions (firms × individual) at each cohort date. Each cohort has the same weight. Standard errors are clustered at the cohort level. The left (right) panel focuses on the first (last) three award cohorts of each legislative term. To construct the first three cohorts, we use cohorts 2 to 4, excluding the very first one. This exclusion accounts for the timing of legislative elections and Government formation, which typically occur shortly before the July 14 cohort; early awards may therefore reflect decisions made under the previous administration. For the last cohorts, we exclude those that precede an early dissolution of the National Assembly, since such dissolutions are unexpected and cannot be anticipated by financial market actors as being close to the end of a political cycle. This occurred once during our study period, in 1997. Overall, 18 out of 72 cohorts fall into the *first three* group, and 12 into the *last three* group of cohorts. The asymmetry is due to the unanticipated 1997 dissolution and the absence in the data of the final cohorts of the 2017-2022 political cycle.
<table><caption>Table 1: Frequency and average age at award date of, and share of female awardees in, *Légion d'honneur*-awarded individuals in Business compared to other *Légion d'honneur* recipients.</caption><thead><tr><th rowspan="2"></th><th colspan="3">Observations</th><th colspan="3">Age at award date</th><th colspan="3">Share of female awardees</th></tr><tr><th>Board members</th><th>Others</th><th>Share of Directors</th><th>Board members</th><th>Others</th><th>Difference (p-value)</th><th>Board members</th><th>Others</th><th>Difference (p-value)</th></tr></thead><tbody><tr><td>Chevalier</td><td>1,623</td><td>36,258</td><td>0.04</td><td>55.2</td><td>62.2</td><td>-7.0 (0.000)</td><td>0.20</td><td>0.36</td><td>-0.16 (0.000)</td></tr><tr><td>Officier</td><td>459</td><td>6,384</td><td>0.07</td><td>62.4</td><td>66.5</td><td>-4.1 (0.000)</td><td>0.11</td><td>0.20</td><td>-0.09 (0.000)</td></tr><tr><td>Commandeur</td><td>157</td><td>1,308</td><td>0.11</td><td>68.1</td><td>68.9</td><td>-0.9 (0.272)</td><td>0.06</td><td>0.18</td><td>-0.12 (0.000)</td></tr><tr><td>Grand officier</td><td>29</td><td>260</td><td>0.10</td><td>72.8</td><td>72.8</td><td>0.0 (0.985)</td><td>0.03</td><td>0.27</td><td>-0.23 (0.006)</td></tr><tr><td>Grand'croix</td><td>10</td><td>82</td><td>0.11</td><td>79.0</td><td>77.0</td><td>2.0 (0.691)</td><td>0.00</td><td>0.27</td><td>-0.27 (0.061)</td></tr></tbody></table>

Directors are *Légion d'honneur* recipients matched to *Mint Global* or *BoardEx* individuals.

<table><caption>Table 2: Average age at award date and frequency of *Grandes Écoles* graduates in *Légion d'honneur*-awarded individuals in Business.</caption><thead><tr><th rowspan="2"></th><th colspan="3">Observations</th><th colspan="3">Age at award date</th></tr><tr><th>Grandes Écoles graduates</th><th>Others</th><th>Ratio of obs. (p-value)</th><th>Grandes Écoles graduates</th><th>Others</th><th>Difference (p-value)</th></tr></thead><tbody><tr><td>Chevalier</td><td>808</td><td>815</td><td>0.99 (0.862)</td><td>53.6</td><td>56.7</td><td>-3.1 (0.000)</td></tr><tr><td>Officier</td><td>270</td><td>189</td><td>1.43 (0.000)</td><td>61.2</td><td>64.0</td><td>-2.8 (0.000)</td></tr><tr><td>Commandeur</td><td>106</td><td>51</td><td>2.08 (0.000)</td><td>67.7</td><td>68.8</td><td>-1.1 (0.304)</td></tr><tr><td>Grand officier</td><td>23</td><td>6</td><td>3.83 (0.001)</td><td>74.2</td><td>67.7</td><td>6.5 (0.066)</td></tr><tr><td>Grand'croix</td><td>8</td><td>2</td><td>4.00 (0.051)</td><td>80.3</td><td>74.0</td><td>6.3 (0.331)</td></tr></tbody></table>

"Obs." stands for "observations". The null hypothesis associated with the p-value of the ratio of observations is that the ratio is equal to 1. This is obtained from testing whether the share of *Grandes Écoles* graduates differs from 50%.
<table><caption>Table 3: Relationship between education-based connections to members of the Government and *Légion d'honneur* awards.</caption><caption>Dependent variable: Receiving a <i>Légion d'honneur</i></caption><thead><tr><th rowspan="2">Sample</th><th>(1)</th><th>(2)</th><th>(3)</th><th>(4)</th><th>(5)</th><th>(6)</th></tr><tr><th colspan="2">All<br>Directors</th><th colspan="2">GÉ-graduated<br>Directors</th><th colspan="2">GÉ-graduated and<br>LH-awarded Directors</th></tr></thead><tbody><tr><td>Grande École graduate</td><td>3.430***<br>(0.132)</td><td>2.931***<br>(0.118)</td><td></td><td></td><td></td><td></td></tr><tr><td>Graduated with member of Gov.</td><td></td><td></td><td>1.914***<br>(0.121)</td><td>1.608***<br>(0.125)</td><td>1.439***<br>(0.103)</td><td>1.482***<br>(0.116)</td></tr><tr><td>Observations</td><td>1,628,330</td><td>1,247,896</td><td>390,009</td><td>377,940</td><td>42,379</td><td>41,742</td></tr><tr><td>No. of decorated people</td><td>1,877</td><td>1,750</td><td>972</td><td>972</td><td>972</td><td>972</td></tr><tr><td>No. of never-decorated people</td><td>34,759</td><td>24,498</td><td>7,094</td><td>6,892</td><td>0</td><td>0</td></tr><tr><td>Covariates</td><td></td><td>Yes</td><td></td><td>Yes</td><td></td><td>Yes</td></tr><tr><td>School fixed effects</td><td></td><td></td><td></td><td>Yes</td><td></td><td>Yes</td></tr></tbody></table>

<footnote>*** p<0.01, ** p<0.05, * p<0.1. Robust standard errors clustered at the cohort level in parentheses. Each column displays estimates from a separate modified Poisson regression. The coefficients are reported as risk ratios. “GÉ” and “LH” stand for “Grande École” and “Légion d’honneur”, respectively. Observations are defined at the Business person × Légion d’honneur cohort-date level. All estimations include fixed effects for the 72 Légion d’honneur cohorts. In columns 1 and 2, the sample consists of all eligible Directors (see footnote 12). In columns 3 and 4, the sample is restricted to Directors who graduated from one of the 15 Grandes Écoles. In columns 5 and 6, the sample is further restricted to Directors who also received a Légion d’honneur over the 1995–2019 period. The dependent variable is a dummy for the date at which a Director received a Légion d’honneur. The “Grande École graduate” variable is a dummy for Business people who graduated from one of the 15 Grandes Écoles. “Graduated with member of Gov.” is a dummy for Directors who graduated from the same institution as a current member of the Government with at most a one-year difference. Covariates included in the even-numbered columns are Director age and gender. See Online Appendix Table A3 for the estimated risk ratios of these variables and institution fixed effects.</footnote>
<table><caption>Table 4: Firms' 2-day compound abnormal returns following the award of a *Légion d'honneur*: Sample restrictions and alternative calculation methods.</caption><thead><tr><th colspan="3">2-day compound abnormal returns</th></tr></thead><tbody><tr><td>Baseline</td><td>0.0021**<br>(0.0010)</td><td></td></tr><tr><td>Excluding top and bottom 5%</td><td>0.0023***<br>(0.0007)</td><td>Business days</td><td>0.0019*<br>(0.0010)</td></tr><tr><td>No cohort weights</td><td>0.0029***<br>(0.0010)</td><td>Complete calibration period</td><td>0.0022**<br>(0.0010)</td></tr><tr><td>At publication date</td><td>0.0021**<br>(0.0010)</td><td>Excluding top-receiving firms</td><td>0.0029*<br>(0.0016)</td></tr></tbody></table>

<footnote>*** p<0.01, ** p<0.05, * p<0.1. Cells display estimates from distinct estimations. Observations are positions (firms × individual) at each cohort date. Each cohort has the same weight except for the *No cohort weights* cell. Standard errors, clustered at the cohort level, are in parentheses. The table displays the average 2-day compound abnormal returns of awarded firms using the SBF 120 as the market index and a calibration period of 120 days calculated with approaches described below. *Baseline*: Benchmark abnormal returns' estimates without sample restrictions, as in Figure 4. *Excluding top and bottom 5%*: We exclude the bottom and top 5 percent of the sample of abnormal returns. *No cohort weights*: The importance of each cohort depends on the number of observations (firms × individual) in that cohort. *At publication date*: Compound abnormal returns are calculated following the date at which the *Légion d'honneur* decree is officially published in the *Journal officiel de la République française*, instead of the decree date. *Business days*: We restrict our sample to cohorts for which the decree was signed on a business day. *Complete calibration period*: We restrict our sample to stocks for which a price is available on every day of the calibration period used to calculate abnormal returns. *Excluding top-receiving firms*: We exclude firms if their Board members collectively received more than 10 awards since 1995.</footnote>