Political Connections and Insider Trading
74 Pages Posted: 7 Jun 2019 Last revised: 14 Jul 2020
Date Written: May 13, 2019
Politically connected insiders are more likely to sell shares prior to negative abnormal returns and engage in other aggressive trading behavior: trading prior and closer to major corporate events, trading during periods that overlap with traditional blackout periods, and missing SEC timely reporting requirements. These findings are consistent with insiders perceiving their political connections as protection against SEC enforcement. The relation between political connections and insider trading is stronger for connections with Senators and with each political party when that party controls both Congressional chambers.
Keywords: insider trading; political connections; political contributions
JEL Classification: G14, G18, G28, G38, K22
Suggested Citation: Suggested Citation