My son has a football (soccer) shirt that has Standard Chartered emblazoned on it. Standard Chartered was one of the most stable British-listed banks during the financial crisis. They also seemed to be paragons of corporate virtue in the messy world of British banks. Not any longer! Yesterday, US regulators claimed that Standard Chartered have for a decade or more run a 'rogue' unit that schemed with Iran's government to hide £160bn in illegal transactions (click here for BBC coverage). Its shares at one stage today were down 25%. Michael White has an interesting piece over at the Guardian on this story.
Daron Acemoglu, Simon Johnson, Amir Kermani, James Kwak and Todd Mitton have written a paper on whether firms connected to Timothy Geithner benefited from these connections. They do so by looking at how stocks of these firms reacted to the announcement that he was a nominee for Treasury Secretary in November 2008. They find that there were large abnormal returns for connected firms. Below is the paper's abstract and the full paper is available here . 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 ne...