Ozlem Akin, Christian Fons-Rosen, José-Luis Peydró, 29 October 2020

There are widespread concerns about potentially excessive connections between the financial sector and political institutions. Less is known about the intensity of information flows between the public and private sector. This column examines insider trading surrounding the largest bank bailout in history, the 2008 US Troubled Asset Relief Program. In politically connected banks, insider buying during the pre-TARP period is associated with increases in abnormal returns around bank-specific TARP announcements. Information transmission seems to be a third pillar of the mutually beneficial relationship between finance and politics, possibly allowing bankers to use their political connections for personal gain.

Diane Coyle, 28 April 2018

Ross Levine, Chen Lin, Lai Wei, 27 May 2016

Economic theory offers conflicting perspectives on the relationship between insider trading and innovation. To date, the empirical evidence is similarly inconclusive. This column exploits the staggered enforcement of inside trading laws across countries to explore the effect on patenting behaviour. The findings point to a robust positive effect of enforcement on various measures of patenting behaviour. Legal systems that protect outside investors from corporate insiders thus help to foster innovation. 

Viral Acharya, Tim Johnson, 11 March 2008

Suspicious trading activities ahead of major mergers and acquisitions have raised concerns about insider trading in recent years. New research attributes the rise in insider trading to the growing number of insiders involved in big deals.

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