Political Connections and Insider Trading

This paper investigates whether political connections affect individuals’ propensity to engage in illegal activities in financial markets. We use the 2007 French presidential election as marker of change in the value of political connections, in a difference-in-differences research design. We examine the behavior of directors of publicly listed companies who are connected to the future president through campaign donations or direct friendships, relative to that of other non-connected directors, before and after the election. We uncover indirect evidence that connected directors do more illegal insider trading after the election. More precisely, we find that purchases by connected directors trigger larger abnormal returns, and that connected directors are more likely not to comply with trading disclosure requirements and to trade closer to major corporate events

Human Capital Disclosures

We explore the recent landscape of quantitative human capital (HC) disclosures for publicly listed U.S. firms. Using a hand-collected sample of disclosures for 2,393 firms, we first provide detailed descriptive evidence about firms' HC disclosure in their ESG reports and 10-K filings. While only 22% of our sample publishes an ESG report, these reports contain much richer HC disclosures than do 10-Ks. Even so, an amendment to Regulation S-K that required firms to disclose more HC information had an economically meaningful effect on disclosure, although many firms seemed to shift information previously disclosed elsewhere. The increase in disclosure in 10-Ks post regulation is driven by metrics on diversity, equity, and inclusion, and employee turnover. Importantly, the amendment is associated with increased value relevance of the disclosures in the post-regulation period but only for firms disclosing financially material metrics in industries where human capital is said to be relevant to investors

Shareholder litigation and corporate disclosure: Evidence from derivative lawsuits

Using the staggered adoption of universal demand (UD) laws in the United States, we study the effect of shareholder litigation risk on corporate disclosure. We find that disclosure significantly increases after UD laws make it more difficult to file derivative lawsuits. Specifically, firms issue more earnings forecasts and voluntary 8-K filings, and increase the length of management discussion and analysis (MD&A) in their 10-K filings. We further assess the direct and indirect channels through which UD laws affect firms' disclosure policies. We find that the effect of UD laws on corporate disclosure is driven by firms facing relatively higher ex ante derivative litigation risk and higher operating uncertainty, as well as firms for which shareholder litigation is a more important mechanism to discipline managers

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

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

Say on pay laws and insider trading

We examine whether mandatory adoption of say-on-pay increases executives’ incentives to engage in insider trading to offset the regulatory-induced increase in compensation risk. Our empirical design exploits the staggered adoption of say-on-pay laws across fourteen countries over the 2000-2015 period. We find that mandatory adoption of say-on-pay is associated with a material increase in insider trading profitability, especially in firms with excess pay and weaker governance. The increase in insider trading profits is mostly driven by more frequent and larger insider sales, consistent with executives’ desire to reduce their exposure to firm-specific risk and rebalance their portfolio. We also find some evidence that after the adoption of say-on-pay insider sales become more predictive of future returns and are more likely timed during information-sensitive windows. Overall, our results highlight the importance of considering potential effects on insider trading incentives when designing compensation reforms and when assessing their impact on executives’ incentives.First author draf

Essais en comptabilité financière empirique

This dissertation is composed of three distinct chapters that empirically investigate various forms of decision-making by firms and/or managers in the field of empirical financial accounting. The first chapter presents a work joint with Francois Brochet and Sven Michael Spira, analyzing how the risk of securities lawsuit for investment-related reasons disciplines managers and reduce agency concerns with respect to investment. The second chapter examines how changes in labor regulation affect managers’ incentives to manipulate earnings using other tools that are ultimately detrimental to firms. The third chapter, joint with Renaud Coulomb and Marc Sangnier, explores how political connections lead directors to engage in plausibly fraudulent insider trading in financial markets.Cette thèse est composée de trois chapitres distincts qui visent à analyser empiriquement la prise de décisions des entreprises et/ou des dirigeants dans le champ de la comptabilité financière. Le premier chapitre, co-écrit avec Francois Brochet et Sven Michael Spira, analyse comment le risque d’action collective sur les marchés financiers pour des raisons liées à des investissement discipline le comportement des dirigeants et réduit les coûts d’agence. Le deuxième chapitre étudie comment des changements de règlementation sur le marché du travail crée des incitations pour les dirigeants à manipuler leurs comptes autrement, ce qui est néfaste pour l’entreprise. Le troisième chapitre, co-écrit avec Renaud Coulomb et Marc Sangnier, étudie comment les connections politiques conduisent les dirigeants des entreprises à commettre des délits d’initiés présumés