Abstract
This paper investigates whether political connections affect individuals' propensity to engage in white-collar crime. We identify connections by campaign donations or direct friendships and use the 2007 French Presidential election as a marker of change in the value of political connections to the winning candidate. We compare the behavior of Directors of publicly listed companies who were connected to the future President to the behavior of other non-connected Directors, before and after the election. Consistent with the belief that connections to a powerful politician can protect someone from prosecution or punishment, we uncover indirect evidence that connected Directors are more likely to engage in suspicious insider trading after the election: Purchases by connected Directors trigger larger abnormal returns, connected Directors are less likely to comply with trading disclosure requirements in a timely fashion, and connected Directors trade closer in time to their firms' announcements of results.
| Original language | English |
|---|---|
| Pages (from-to) | 2543-2576 |
| Number of pages | 34 |
| Journal | Journal of the European Economic Association |
| Volume | 19 |
| Issue number | 5 |
| DOIs | |
| Publication status | Published - 1 Oct 2021 |
Funding
This paper was previously circulated under the title "Political connections and insider trading".We are very grateful to Pat Akey, Stéphane Benveniste, John Bizjak, Yann Bramoullé, Quoc-Anh Do, Raymond Fisman, Denis Gromb, Philip Joos, Yotam Kaplan, Paul Maarek, Alexei Ovtchinnikov, Julia Reynolds, Pablo Ruiz-Verdú, Ahmed Tahoun, David Thesmar, Laurence Van Lent, Luigi Zingales, and Yanos Zylberberg, as well as to numerous seminar and conference audiences for helpful comments. We acknowledge financial support from the Paris School of Economics Research Fund. This work was supported by the French National Research Agency grant ANR-17-EURE-0020. Special thanks go to Fabrice Arfi and Mathilde Mathieu from Mediapart.fr for providing us with the list of UMP contributors. We thank three anonymous referees and the editor, Paola Giuliano, for their especially insightful comments.
