Akin, Ozlem Coleman, Nicholas S. Fons-Rosen, Christian Peydró, José-Luis
Year of Publication:
[Journal:] Financial Management [ISSN:] 1755-053X [Issue:] Early View Articles
We study insider trading behavior surrounding the largest bank bailout in history: Troubled Asset Relief Program (TARP). In politically connected banks, insider buying during the pre‐TARP period is associated with increases in abnormal returns around bank‐specific TARP announcement; for unconnected banks, trading and returns are uncorrelated. Results hold across insiders within the same bank and are stronger for finance‐related government connections. Through a Freedom of Information Act request, we obtained the previously undisclosed TARP funds requested; the ratio of received to requested funds correlates both with abnormal returns and insider buying behavior in connected banks.
bank bailouts insider trading political connections political economy in banking TARP