Does Insider Trading Explain Price Run-Up Ahead of Takeover Announcements?

38 Pages Posted: 1 Dec 2010 Last revised: 14 Jan 2015

See all articles by Sean Foley

Sean Foley

University of Sydney Business School

Alex Frino

The University of Sydney - Discipline of Finance; Financial Research Network (FIRN)

Angelo Aspris

affiliation not provided to SSRN

Date Written: May 10, 2012

Abstract

This study empirically examines the impact of changes in substantial shareholdings ahead of 450 Australian takeover offers between the years 2000-2009. Previous studies have attributed a significant proportion of the price run-up effect in takeover targets to insider-trading behavior. This paper examines the contribution of a broad range of public information sources that are known to typically generate market anticipation, including the acquisition of toeholds ahead of takeover announcements. Our findings show no significant pre-bid run-up for takeover targets after considering these sources. We conclude from these results that previous findings attributing pre-bid share price run-up to illegal insider trading may overstate the existence of such conduct.

Keywords: Toehold, takeover, short term, long term

Suggested Citation

Foley, Sean and Frino, Alex and Aspris, Angelo, Does Insider Trading Explain Price Run-Up Ahead of Takeover Announcements? (May 10, 2012). Finance and Corporate Governance Conference 2011 Paper. Available at SSRN: https://ssrn.com/abstract=1717420 or http://dx.doi.org/10.2139/ssrn.1717420

Sean Foley (Contact Author)

University of Sydney Business School ( email )

Sydney
Australia

Alex Frino

The University of Sydney - Discipline of Finance ( email )

Futures Research Centre
P.O. Box H58
Sydney NSW
Australia
+61 2 9299 1809 (Phone)
+61 2 9299 1830 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Angelo Aspris

affiliation not provided to SSRN ( email )

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