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Political Connections and Insider Trading

Thomas Bourveau (), Renaud Coulomb () and Marc Sangnier ()
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Thomas Bourveau: Hong Kong University of Science and Technology

No 1635, AMSE Working Papers from Aix-Marseille School of Economics, France

Abstract: This paper investigates whether political connections affect individuals’ propensity to engage in illegal activities in financial markets. We use the 2007 French presidential election as marker of change in the value of political connections, in a difference-in-differences research design. We examine the behavior of directors of publicly listed companies who are connected to the future president through campaign donations or direct friendships, relative to that of other non-connected directors, before and after the election. We uncover indirect evidence that connected directors do more illegal insider trading after the election. More precisely, we find that purchases by connected directors trigger larger abnormal returns, and that connected directors are more likely not to comply with trading disclosure requirements and to trade closer to major corporate events.

Keywords: political connections; white-collar crime; insider trading (search for similar items in EconPapers)
JEL-codes: D72 G14 G18 G38 K22 K42 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2016-10
New Economics Papers: this item is included in nep-law and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed

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Related works:
Working Paper: Political Connections and White-collar Crime: Evidence from Insider Trading in France (2020) Downloads
Working Paper: Political Connections and Insider Trading (2016) Downloads
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