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Anticipating the financial crisis: evidence from insider trading in banks

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dc.contributor.author Akin, Ozlem
dc.contributor.author Marín, José M.
dc.contributor.author Peydró, José-Luis
dc.date.accessioned 2019-04-12T07:29:51Z
dc.date.available 2019-04-12T07:29:51Z
dc.date.issued 2019
dc.identifier.uri http://hdl.handle.net/10230/37099
dc.description.abstract Banking crises are recurrent phenomena, often induced by excessive bank risk-taking, which may be due to behavioral reasons (over-optimistic banks neglecting risks) and to agency problems between bank shareholders with debt-holders and taxpayers (banks understand high risk-taking). We test whether US banks’ stock returns in the 2007-08 crisis are related to bank insiders’ sales of their own bank shares in the period prior to 2006:Q2 (the peak and reversal in real estate prices). We find that top-five executives’ sales of shares predict the cross-section of banks returns during the crisis; interestingly, effects are insignificant for independent directors’ and other officers’ sales. Moreover, the top-five executives’ significant impact is stronger for banks with higher exposure to the real estate bubble, where an increase of one standard deviation of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. The informational content of bank insider trading before the crisis suggests that insiders understood the excessive risk-taking in their banks, which has important implications for theory, public policy and the understanding of crises.
dc.description.sponsorship José M. Marín acknowledges financial support from the Spanish Ministry of Economics and Competitiveness (project ECO2015-69205) and José Luis Peydró rom both the Spanish Ministry of Economics and Competitiveness (project ECO2012-32434) and the European Research Council Grant (project 648398).
dc.format.mimetype application/pdf
dc.language.iso cat
dc.relation.ispartofseries Economic Working Paper Series;1524
dc.title Anticipating the financial crisis: evidence from insider trading in banks
dc.type info:eu-repo/semantics/workingPaper
dc.subject.keyword Financial crises
dc.subject.keyword Insider trading
dc.subject.keyword Banking
dc.subject.keyword Risk-taking
dc.subject.keyword Agency
dc.subject.keyword Problems in firms
dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2015-69205
dc.relation.projectID info:eu-repo/grantAgreement/ES/3PN/ECO2012-32434
dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/648398
dc.rights.accessRights info:eu-repo/semantics/openAccess

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