Political connections and informed trading: evidence from TARP

Akın, Özlem; Coleman, Nicholas S.; Fons‐Rosen, Christian; Peydró, José-Luis

doi:http://dx.doi.org/10.1111/fima.12292

Political connections and informed trading: evidence from TARP

Llicència

Citació

Akin O, Coleman NS, Fons‐Rosen C, Peydró J‐L. Political connections and informed trading: evidence from TARP. Financ Manage. 2021;50(3):619-44. DOI: 10.1111/fima.12292

Resum

We study insider trading behavior surrounding the largest bank bailout in history: TARP. In politically‐connected banks, insider buying during the pre‐TARP period is associated with increases in abnormal returns around bank‐specific TARP announcement; for unconnected banks, trading and returns are uncorrelated. Results hold across insiders within the same bank and are stronger for finance‐related government connections. Through a FOIA request we obtained the previously undisclosed TARP funds requested; the ratio of received to requested funds correlates both with abnormal returns and insider buying behavior in connected banks.