Accounting and Control

Political connections and the informativeness of insider trades

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We analyze the trading of corporate insiders at leading financial institutions during the 2007 to 2009 financial crisis. We find strong evidence of a relation between political connections and informed trading during the period in which TARP funds were disbursed, and that the relation is most pronounced among corporate insiders with recent direct connections. Notably, we find evidence of abnormal trading by politically connected insiders 30 days in advance of TARP infusions, and that these trades anticipate the market reaction to the infusion. Our results suggest that political connections can facilitate opportunistic behavior by corporate insiders.
Bibliographic citation: JAGOLINZER, A. D., LARCKER D. F., ORMAZABAL, G., TAYLOR, D. (2020). Political connections and the informativeness of insider trades. Journal of Finance, 75 (4), 1833-1876. doi:

Reference: (DOI)
Date: 01/08/2020
Author(s): Alan D. Jagolinzer; Larcker D. F.; Gaizka Ormazabal; D.J. Taylor
Document type: Article in Journal (refereed)
Department: Accounting and Control
Languages: English