Political Connections and Insider Trading

36 Pages Posted: 5 Oct 2016 Last revised: 23 Jan 2018

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: October 5, 2016

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

JEL Classification: D72, G14, G18, G38, K22, K42

Suggested Citation

Bourveau, Thomas and Coulomb, Renaud and Sangnier, Marc, Political Connections and Insider Trading (October 5, 2016). Available at SSRN: https://ssrn.com/abstract=2848096 or http://dx.doi.org/10.2139/ssrn.2848096

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

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
97
Abstract Views
1,197
rank
115,574
PlumX Metrics