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Political Connections and White-Collar Crime: Evidence from Insider Trading in France

Author

Listed:
  • Thomas Bourveau
  • Renaud Coulomb

    (Mines Paris - PSL (École nationale supérieure des mines de Paris) - PSL - Université Paris Sciences et Lettres, Melbourne U., Faculty of Business and Economics [Melbourne] - University of Melbourne)

  • Marc Sangnier

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. (JEL: D72, G14, G18, G38, K22, K42)

Suggested Citation

  • Thomas Bourveau & Renaud Coulomb & Marc Sangnier, 2021. "Political Connections and White-Collar Crime: Evidence from Insider Trading in France," Post-Print hal-05461998, HAL.
    • Handle: RePEc:hal:journl:hal-05461998
    DOI: 10.1093/jeea/jvab004
    as

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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