MIT Department of Economics Working Paper No. 13-22
62 Pages Posted: 8 Dec 2013
Date Written: November 27, 2013
The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner’s confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small network of financial sector executives during a time of acute crisis and heightened policy discretion.
Keywords: political connections, economic crises, institutions
JEL Classification: G01, G14, G21, G28
Suggested Citation: Suggested Citation
Acemoglu, Daron and Johnson, Simon and Kermani, Amir and Kwak, James and Mitton, Todd, The Value of Connections in Turbulent Times: Evidence from the United States (November 27, 2013). MIT Department of Economics Working Paper No. 13-22. Available at SSRN: https://ssrn.com/abstract=2363609 or http://dx.doi.org/10.2139/ssrn.2363609