Political connections and informed trading: Evidence from TARP

Artikel

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: Financial Management ; ISSN: 1755-053X ; Volume: 50 ; Year: 2021 ; Issue: 3 ; Pages: 619-644 ; Hoboken: Wiley

Classification and Topics

• Classification: Wirtschaft ; Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior ; Financial Crises ; Banks; Depository Institutions; Micro Finance Institutions; Mortgages ; Financial Institutions and Services: Government Policy and Regulation
• Subject: bank bailouts ; insider trading ; political connections ; political economy in banking ; TARP

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Akin, Ozlem ; Coleman, Nicholas S. ; Fons-Rosen, Christian ; Peydró, José-Luis
• Event: Veröffentlichung
• (who): Wiley
• (where): Hoboken
• (when): 2019

Further information

• DOI: doi:10.1111/fima.12292
• Handle: http://hdl.handle.net/10419/231482
• Last update: 10.03.2025, 11:42 AM CET