Study with us
Clemens Burgel's research addresses the relationship between political connections and potentially informed trading by corporate insiders, focusing on the onset of the 2008 financial crisis.
Relying on meeting data of Timothy Geithner, President of the New York Federal Reserve at the time, he presents the effects that direct connections of corporate insiders to Geithner have. Burgel cross-referenced these meetings with subsequent trades, control for alternative macro- and organization-level explanations, and show excess sales returns of up to ~21% against immediate peers of insiders, in addition to ~6% over the market. This suggests that political connections provide corporate insiders with an information advantage.
Burgel also presents evidence that connected insiders of firms that are directly benefited by the Troubled Asset Relief Program (the bank bailout program of the US at the time) only realize ~6% excess returns over peers; moreover, insider trading returns and volume decline substantially at the beginning of the Program, suggesting a different source of informational advantage, which conflicts with earlier literature.