Opportunism and Insider Trading during the Trade War

This thesis examines opportunism of insider trading during the trade war in 2018. The objectives of this
thesis are: first, to investigate whether political connections can facilitate insiders to behave
opportunistically; second, to examine whether opportunistic or routine insiders to be involved in
informed trading; third, to observe whether social connections can facilitate opportunistic sellers to be
involved in informed trading.
The first empirical chapter analyses the short-term profit making behaviour of politically connected
insiders at all US companies during the trade war in 2018. The baseline results refer to the positive
relation between political connections and informed trading during the trade war. These relations are
stronger among insiders with recent direct political links than stale ones. Additionally, event studies
and difference-in-differences results indicate that the politically connected insiders generated higher
abnormal returns at event windows surrounding the announcement date of the trade war. All results
suggest that politically connected insiders can have a significant information advantage during the trade
war and that connections can facilitate them to behave opportunistically.
The second empirical chapter examines whether opportunistic insiders earn higher short-term returns
compared to routine insiders in US during the trade war in 2018. Importantly, our findings provide
evidence that opportunistic insiders receive higher returns compared to routine insiders during the trade
war. This evidence is also pronounced when opportunistic insiders are politically connected.
Furthermore, we interestingly find that opportunistic CEOs and female insiders receive higher returns
compared to routine CEOs and female insiders. Our results are robust to various model specifications,
alternative measures, and endogeneity concerns. Overall, our findings suggest that opportunistic
insiders can have a significant information advantage and that information can facilitate them to be
involved in informed trading during the trade war.
The final empirical chapter analyses the opportunistic selling by socially connected insiders at all US
firms during the trade war in 2018. We find evidence that socially connected opportunistic sellers
receive higher returns than socially connected routine sellers. This evidence is more pronounced when
opportunistic sellers are more socially connected and belong to firms which have business connections
with China. Furthermore, we find supportive evidence that socially connected opportunistic sellers
receive more returns than politically connected opportunistic sellers during the trade war. Our findings
survive various alternative, robustness and endogeneity tests. Overall, our findings suggest that social
connections can facilitate opportunistic sellers to be involved in informed trading.