NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

NBER Working Papers by James Kwak

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Working Papers

December 2013The Value of Connections in Turbulent Times: Evidence from the United States
with Daron Acemoglu, Simon Johnson, Amir Kermani, Todd Mitton: w19701
The announcement of Timothy Geithner as nominee for Treasury Secretary in November 2008 produced a cumulative abnormal return for financial firms with which he had a connection. This return was about 6% after the first full day of trading and about 12% after ten trading days. There were subsequently abnormal negative returns for connected firms when news broke that Geithner’s confirmation might be derailed by tax issues. Excess returns for connected firms may reflect the perceived impact of relying on the advice of a small network of financial sector executives during a time of acute crisis and heightened policy discretion.

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