Political connections and informed trading: Evidence from TARP
Christian Fons-Rosen and
Jose-Luis Peydro ()
EconStor Open Access Articles, 2019
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.
Keywords: political connections; political economy in banking; insider trading; TARP; bank bailouts (search for similar items in EconPapers)
JEL-codes: D72 G01 G21 G28 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:216891
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