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.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
• dc.date.accessioned 2024-11-14T10:09:57Z
• dc.date.available 2024-11-14T10:09:57Z
• dc.date.issued 2016-05-01
• dc.date.modified 2024-11-14T10:04:51Z
• dc.description.abstract Banking crises are recurrent phenomena, often induced by excessive bank risk-taking, which may be due to behavioural reasons (over-optimistic banks neglecting risks) and to conflicts of interest between bank shareholders/managers and debtholders/taxpayers (banks exploiting moral hazard). We test whether US banks' stock returns in the 2007-08 financial crisis are associated with bank insiders' sales of their own bankâ s shares in the period prior to 2006Q2 (the peak and reversal in real estate prices). We find that top-five executives' sales of shares predict bank performance during the crisis. Interestingly, effects are insignificant for the sales of independent directors and other officers. Moreover, the top-five executives' impact is stronger for banks with higher exposure to the real estate bubble, where a one standard deviation increase of insider sales is associated with a 13.33 percentage point drop in stock returns during the crisis period. Finally, even though bankers in riskier banks sold more shares (furthering their own interests), they did not change their bankâ s policies, e.g. by reducing bank-level exposure to real estate. The informational content of bank insider trading before the crisis suggests that insiders knew that their banks were taking excessive risks, which has important implications for theory, public policy, and the understanding of crises, as well as a supervisory tool for early warning signals.
• dc.format.mimetype application/pdf*
• dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1524
• dc.identifier.citation Economic Policy, 35 (102), June 2020, pp. 213-267
• dc.identifier.uri http://hdl.handle.net/10230/26837
• dc.language.iso eng
• dc.relation.ispartofseries Economics and Business Working Papers Series; 1524
• dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
• dc.rights.accessRights info:eu-repo/semantics/openAccess
• dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
• dc.subject.keyword financial crises
• dc.subject.keyword insider trading
• dc.subject.keyword banking
• dc.subject.keyword risk-taking
• dc.subject.keyword agency problems in firms.
• dc.subject.keyword Finance and Accounting
• dc.subject.keyword Macroeconomics and International Economics
• dc.subject.keyword Labour, Public, Development and Health Economics
• dc.title Anticipating the financial crisis: Evidence from insider trading in banks
• dc.title.alternative
• dc.type info:eu-repo/semantics/workingPaper