Political Connections and Insider Trading

35 Pages Posted: 30 Sep 2016 Last revised: 3 Dec 2016

See all articles by Thomas Bourveau

Thomas Bourveau

Columbia University - Columbia Business School, Accounting, Business Law & Taxation

Renaud Coulomb

University of Melbourne

Marc Sangnier

Aix-Marseille University - Aix-Marseille School of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: August 30, 2016

Abstract

This paper investigates whether political connections affect individuals’ propensity to engage in illegal activities in financial markets. We use the French 2007 presidential election as a plausibly exogenous change in the value of political connections in a difference-in-differences research design. Specifically, we examine the behavior of directors of publicly listed companies that 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 find that after the election, insider purchases by connected directors experience 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: Insider Trading, Politics of Financial Markets, Securities Regulation

JEL Classification: G14, G18, G38, K22

Suggested Citation

Bourveau, Thomas and Coulomb, Renaud and Sangnier, Marc, Political Connections and Insider Trading (August 30, 2016). 2nd Annual Financial Institutions, Regulation and Corporate Governance Conference, Available at SSRN: https://ssrn.com/abstract=2832514 or http://dx.doi.org/10.2139/ssrn.2832514

Thomas Bourveau (Contact Author)

Columbia University - Columbia Business School, Accounting, Business Law & Taxation ( email )

3022 Broadway
New York, NY 10027
United States

Renaud Coulomb

University of Melbourne ( email )

Melbourne, 3010
Australia

Marc Sangnier

Aix-Marseille University - Aix-Marseille School of Economics ( email )

5-9 Boulevard Bourdet
Marseille, 13001
France

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