Working Paper: NBER ID: w19701
Authors: Daron Acemoglu; Simon Johnson; Amir Kermani; James Kwak; Todd Mitton
Abstract: 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.
Keywords: Connections; Financial Firms; Crisis
JEL Codes: G01; G14; G21; G28
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Geithner's connections (F38) | cumulative abnormal returns (C29) |
| Geithner's nomination announcement (E63) | cumulative abnormal returns (C29) |
| Geithner's confirmation status (F38) | market performance of connected firms (L25) |
| Geithner's connections (F38) | lower CDS spreads (G19) |