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

21 Pages Posted: 4 Mar 2014

See all articles by Angelo Aspris

Angelo Aspris

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

Sean Foley

University of Sydney Business School

Alex Frino

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

Date Written: March 2014

Abstract

This study empirically examines the impact of changes in substantial shareholdings ahead of 450 Australian takeover offers between the years 2000 and 2009. Previous studies have attributed a significant proportion of the price run‐up effect in takeover targets to insider‐trading behaviour. This study 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: Takeovers, Market efficiency, Market anticipation, Insider trading, Toeholds, Substantial shareholder notices

Suggested Citation

Aspris, Angelo and Foley, Sean and Frino, Alex, Does Insider Trading Explain Price Run‐Up Ahead of Takeover Announcements? (March 2014). Accounting & Finance, Vol. 54, Issue 1, pp. 25-45, 2014. Available at SSRN: https://ssrn.com/abstract=2404091 or http://dx.doi.org/10.1111/acfi.12003

Angelo Aspris (Contact Author)

University of Sydney - Discipline of Finance ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

Financial Research Network (FIRN)

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

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

Sean Foley

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

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