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

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  • Bourveau, Thomas
  • Coulomb, Renaud
  • Sangnier, Marc

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.

Suggested Citation

  • Bourveau, Thomas & Coulomb, Renaud & Sangnier, Marc, 2020. "Political Connections and White-collar Crime: Evidence from Insider Trading in France," MPRA Paper 104236, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:104236
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    Citations

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    Cited by:

    1. Goergen, Marc & Renneboog, Luc & Zhao, Yang, 2019. "Insider trading and networked directors," Journal of Corporate Finance, Elsevier, vol. 56(C), pages 152-175.
    2. Stéphane Benveniste & Renaud Coulomb & Marc Sangnier, 2022. "The (Market) Value of State Honors," Working Papers halshs-03558566, HAL.
    3. Ozlem Akin & Nicholas S. Coleman & Christian Fons‐Rosen & José‐Luis Peydró, 2021. "Political connections and informed trading: Evidence from TARP," Financial Management, Financial Management Association International, vol. 50(3), pages 619-644, September.
    4. Gibson, Matthew, 2021. "Employer Market Power in Silicon Valley," IZA Discussion Papers 14843, Institute of Labor Economics (IZA).
    5. Ormazabal, Gaizka & Jagolinzer, Alan D. & Larcker, David F. & Taylor, Daniel, 2017. "Political Connections and the Informativeness of Insider Trades," CEPR Discussion Papers 12153, C.E.P.R. Discussion Papers.
    6. Brice Fabre & Marc Sangnier, 2024. "Where and why do politicians send pork? Evidence from central government transfers to French municipalities," Working Papers halshs-04687331, HAL.
    7. Brice Fabre & Marc Sangnier, 2022. "Where do politicians send pork? Evidence from central government transfers to French municipalities," DeFiPP Working Papers 2202, University of Namur, Development Finance and Public Policies.
    8. Ozlem Akin & Nicholas S. Coleman & Christian Fons-Rosen & José-Luis Peydró, 2016. "Political Connections: Evidence From Insider Trading Around TARP," Working Papers 935, Barcelona School of Economics.
    9. Ormazabal, Gaizka, 2018. "The Role of Stakeholders in Corporate Governance: A View from Accounting Research," CEPR Discussion Papers 12775, C.E.P.R. Discussion Papers.
    10. Brice Fabre & Marc Sangnier, 2024. "Where and why do politicians send pork? Evidence from central government transfers to French municipalities," Institut des Politiques Publiques halshs-04687331, HAL.
    11. Alan D. Jagolinzer & David F. Larcker & Gaizka Ormazabal & Daniel J. Taylor, 2020. "Political Connections and the Informativeness of Insider Trades," Journal of Finance, American Finance Association, vol. 75(4), pages 1833-1876, August.

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    More about this item

    Keywords

    Political Connections; White-Collar Crime; Insider Trading;
    All these keywords.

    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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