Impact of the Galleon Case On Informed Trading Before Merger Announcements

41 Pages Posted: 14 Jun 2013  

Inga Chira

California State University- Northridge

Jeff Madura

Florida Atlantic University - College of Business

Date Written: December 5, 2012

Abstract

On October 16, 2009, the U.S. government charged Galleon hedge fund founder Raj Rajaratnam and five others with insider trading, in what was described by a key prosecutor overseeing the case as a "wake-up call to Wall Street and to every hedge fund manager." We find that the mean abnormal stock price runup of targets (a measure of informed trading) during the 26 months since the inception of the Galleon case declined from 5.12% to 2.84%. The early evidence strongly suggests that the Galleon case has sent a clear signal to the traders, and that the traders are listening.

Keywords: Insider Trading, Galleon, Mergers

JEL Classification: G34

Suggested Citation

Chira, Inga and Madura, Jeff, Impact of the Galleon Case On Informed Trading Before Merger Announcements (December 5, 2012). Journal of Financial Research, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2278635

Inga Chira (Contact Author)

California State University- Northridge ( email )

Jeff Madura

Florida Atlantic University - College of Business ( email )

University Tower
220 SE 2 Avenue
Fort Lauderdale, FL 33301
United States
(954)762-5632 (Phone)
(954)762-5245 (Fax)

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