Political connections and the informativeness of insider trades
Accepted version
Peer-reviewed
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Repository DOI
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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
1540-6261
Volume Title
75
Publisher
Wiley-Blackwell
Publisher DOI
Rights
All rights reserved