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Political connections and the informativeness of insider trades

Accepted version
Peer-reviewed

Type

Article

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Authors

Jagolinzer, AD 
Larcker, DF 
Ormazabal, G 
Taylor, DJ 

Abstract

We analyze the trading of corporate insiders at leading financial institutions during the Financial Crisis. We find strong evidence of a relation between political connections and informed trading during the period in which TARP funds were disbursed, and that the relation is most pronounced among corporate insiders with recent direct connections. Notably, we find evidence of abnormal trading by politically connected insiders 30 days in advance of TARP infusions, and that these trades anticipate the market reaction to the infusion. Our results suggest that political connections can facilitate opportunistic behavior by corporate insiders.

Description

Keywords

38 Economics, 3502 Banking, Finance and Investment, 3801 Applied Economics, 35 Commerce, Management, Tourism and Services

Journal Title

The Journal of Finance

Conference Name

Journal ISSN

0022-1082
1540-6261

Volume Title

75

Publisher

Wiley-Blackwell

Rights

All rights reserved
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