When France’s Légion d’honneur awards move stock prices: A market signal of political access

State honours are designed as symbols of merit and public recognition. But they may also convey information with economic value. This column explores the market value of the Légion d’honneur. When corporate directors of French listed firms receive the honour, their companies’ share prices rise. This market reaction is concentrated among directors without a publicly observable educational link to members of the incumbent government before the award. The pattern suggests that state distinctions can provide investors with new information about a director’s potential access to policymakers.

An expanding economic literature examines the effects of awards and public recognition. Even without monetary rewards, symbolic distinctions can increase workers’ effort (Kosfeld and Neckermann 2011), stimulate later innovation (Moser and Nicholas 2013), and alter scientific output (Borjas and Doran 2015). Most of this work, however, concerns prizes given by employers, experts, or scholarly communities.

State honours are a distinctive form of symbolic recognition. They are nearly universal: more than nine in ten countries have a system of civilian merit awards. Such distinctions span republics and monarchies, democracies and authoritarian regimes: from France’s Légion d’honneur and the UK’s Order of the British Empire to Saudi Arabia’s Order of King Abdulaziz, China’s Order of the Republic, and the US’ Presidential Medal of Freedom. They confer public prestige, generally carry no direct material reward, and are inexpensive for governments to distribute. Yet their economic consequences remain poorly understood.

In a new study (Benveniste et al. 2026), we quantify the market value of France’s most prestigious civilian distinction, the Légion d’honneur, when it is awarded to corporate directors. We show that recipients’ firms experience positive stock market reactions in the days following the awards. Crucially, this response is concentrated among directors for whom the award appears to reveal political proximity not already visible to investors. In this context, state honours appear to function as a public signal of potential access to policymakers.

Awards as new information for investors

To analyse this phenomenon, we constructed a comprehensive dataset linking the universe of civilian Légion d’honneur awards between 1995 and 2019 to board positions in French listed firms. This yields 1,240 awards received by 1,074 corporate directors, across 72 award cohorts.

The awarding process is essential because the names of nominees and recipients are not public before the official decree is published. Using 25 years of press articles in the five most important daily newspapers in France, we find that press mentions of recipients increase 10-fold in the days immediately following the announcement. Announcements therefore provide investors with new public information. To measure the market response, we use an event-study design and specifically compare recipient firms’ actual returns around the decree with the returns expected from models of market movements. The difference – an abnormal return that may be compounded over a few days – is the standard measure of the market reaction to an event (MacKinlay 1997).

State awards to corporate directors raise their firms’ value

The market response is immediate and positive. In the two trading days following an award announcement, recipient firms earn an average compound abnormal return of 0.21%. Five days after the decree, compound abnormal returns reach 0.43%, with no subsequent reversal. For the median firm in our sample, the initial two-day effect corresponds to an increase in market value of around €7 million, in constant 2000 euros.

The effect is smaller than the market reactions associated with more direct indicators of corporate directors’ political connections, such as electoral victories of a politician linked to firms’ directors (Coulomb and Sangnier 2014) or occupational moves between business and politics (Faccio 2006). But the overall significance of Légion d’honneur awards is magnified by their low cost and high frequency.

A series of placebo tests and robustness checks shows that the pattern is not driven by anticipation or an artefact of the way expected returns are calculated. Share prices do not move unusually before the decree, nor at award cohorts in which none of a firm’s directors is honoured, nor around military-award dates and other government-related events. The results also hold under alternative market benchmarks and estimation windows.

A positive market response does not by itself explain what investors learn. One possibility is that public recognition may lead investors to revise their assessment of a director’s ability, reputation, or future effort. Another is that awards signal political proximity. Access to policymakers is known to be valuable to firms (Fisman 2001), especially where regulation, licensing, subsidies, or public procurement shape business prospects (Goldman et al. 2013). The Légion d’honneur leaves room for the latter interpretation: as with many state honours, nominees must demonstrate ‘outstanding merit’, but this is not precisely determined by a fixed set of observable criteria. Its attribution therefore has a discretionary dimension.

State awards as a new signal of political connections

To distinguish between these explanations, we exploit a distinctive feature of French elite networks. A small group of selective institutions, known as the grandes écoles, trains a disproportionate share of political and business elites. Their relatively small cohorts create durable and publicly visible alumni networks (Kramarz and Thesmar 2013).

We match data on corporate directors and government members between 1995 and 2019 with historical student registers and alumni lists from 15 grandes écoles. We classify a director as having a pre-award political tie when they attended the same institution at the same time as an incumbent politician involved in the award process. This is a proxy for political connection that investors could plausibly infer from public biographies and alumni records.

The implication is straightforward. When such a link is already present, an award should add little information and should have little or no effect on the firm’s share price. But when it is not, investors may interpret the award as revealing otherwise unobserved access to policymakers.

Consistent with this prediction, no statistically significant market reaction is detected when an awarded director already has an educational link to a politician involved in the awarding process (Figure 1). By contrast, the reaction is positive and statistically significant when the director has no such prior link. The pattern is consistent with investors interpreting the award as valuable information only when access to policymakers was not already apparent.

Figure 1 Firms’ compound abnormal returns after their directors are awarded the Légion d’honneur, by the directors’ connection statuses  

Notes: The figure plots compound abnormal returns in the days following an award announcement; bars show 95% confidence intervals. Observations are positions (firms x individual) at different dates. Pre-award connection status is defined as attendance at the same grande école, in the same or an adjacent cohort, as a politician involved in the awarding process.

The timing of the award provides further support for this interpretation. Awards granted early in a legislative term generate significantly larger market reactions, whereas awards announced near the end of the political cycle have no detectable effect. This is difficult to reconcile with an explanation based on recognition of past merit. Rather, it is consistent with investors valuing the expected duration of political access that an award may reveal.

Additional results point in the same direction. The estimated market response is larger for firms whose activities are more exposed to government decisions, including public expenditure, regulation, and public ownership. Finally, the reaction does not spread to other firms in the same industry, suggesting that investors interpret the award as firm-specific information rather than as news of an industry-wide policy shift.

Implications for state awards

France is a particularly appropriate setting because of the prominence of the Légion d’honneur and the dense overlap between business and political elites. But state decorations exist across most political systems, and the economically valuable information that public honours appear to convey therefore matters well beyond France.

Our results do not show that particular awards were improperly granted or that some recipients received preferential treatment. They rather highlight an underappreciated channel through which states influence markets: when governments distribute public prestige, they may be distributing information with economic value as well, notably credible information about access to policymakers. This raises a question about the design of symbolic distinctions. State honours are intended to recognise service and merit. Yet, when their attribution involves discretionary processes and political actors, they may also alter expectations about future influence.

The implication is not necessarily that governments should distribute fewer honours. State recognition can reward service, sustain civic norms, and acknowledge contributions that markets do not value adequately. But governments may wish to consider whether the criteria, safeguards, and information surrounding nominations sufficiently preserve that primary purpose. Clearer criteria, independent review, and greater transparency about the institutional route through which nominations are made could reduce the scope for awards to be interpreted primarily as signals of political proximity, although such changes would involve trade-offs with the discretion that can help recognise diverse forms of merit and sustain both the symbolic and soft-power functions of state honours.

Source : VOXeu