Political connections and informed trading: Evidence from TARP

Ozlem Akin, Nicholas S. Coleman, Christian Fons-Rosen and Jose-Luis Peydro

EconStor Open Access Articles and Book Chapters, 2019, vol. 50, issue 3, 619-644

Abstract: We study insider trading behavior surrounding the largest bank bailout in history: Troubled Asset Relief Program (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 Freedom of Information Act 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.

Keywords: bank bailouts; insider trading; political connections; political economy in banking; TARP (search for similar items in EconPapers)
JEL-codes: D72 G01 G21 G28 (search for similar items in EconPapers)
Date: 2019
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Related works:
Journal Article: Political connections and informed trading: Evidence from TARP (2021)
Working Paper: Political connections and informed trading: Evidence from TARP (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:216891

DOI: 10.1111/fima.12292

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