The Value of Connections in Turbulent Times

Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak, and Todd Mitton, “The Value of Connections in Turbulent Times: Evidence from the United States,” Journal of Financial Economics 121, no. 2 (August 2016): 368–91.


November 2015 version: Value of Connections in Turbulent Times (2015-11)

Link to published version


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 prior 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. Personal connections to top executive branch officials can matter greatly even in a country with strong overall institutions, at least during a time of acute financial crisis and heightened policy discretion.