The value of connections in turbulent times: Evidence from the United States

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton

Journal of Financial Economics, 2016, vol. 121, issue 2, 368-391

Abstract: The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a prior connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner’s confirmation might be derailed by tax issues. Personal connections to top executive branch officials can matter greatly even in a country with strong overall institutions, at least during a time of acute financial crisis and heightened policy discretion.

Keywords: Political connections; Economic crises; Institutions (search for similar items in EconPapers)
JEL-codes: G01 G14 G21 G28 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (265)

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Working Paper: The Value of Connections in Turbulent Times: Evidence from the United States (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:121:y:2016:i:2:p:368-391

DOI: 10.1016/j.jfineco.2015.10.001

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