A Run-Down of Merger Target Run-Ups

45 Pages Posted: 4 Dec 2017 Last revised: 20 Apr 2018

See all articles by Marie Dutordoir

Marie Dutordoir

University of Manchester - Manchester Business School

Evangelos Vagenas-Nanos

University of Glasgow

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Betty H.T. Wu

University of Glasgow Adam Smith Business School

Date Written: April 11, 2018

Abstract

We show that run-ups in U.S. target firm stock returns preceding merger announcements have declined drastically over recent decades. The negative trend in target run-ups cannot be fully explained by changes in deal or target characteristics associated with merger anticipation. However, it disappears after controlling for changes in the strength of U.S. insider trading regulation over the research period. Our results, which survive robustness and placebo tests, suggest that U.S. insider trading rules are effective at curbing pre-announcement trading.

Keywords: target run-up, mergers and acquisitions, merger prediction, insider trading

JEL Classification: G14, G34, G18

Suggested Citation

Dutordoir, Marie and Vagenas-Nanos, Evangelos and Verwijmeren, Patrick and Wu, Betty H.T., A Run-Down of Merger Target Run-Ups (April 11, 2018). Available at SSRN: https://ssrn.com/abstract=3080171 or http://dx.doi.org/10.2139/ssrn.3080171

Marie Dutordoir

University of Manchester - Manchester Business School ( email )

Booth Street West
Manchester, M15 6PB
United Kingdom

Evangelos Vagenas-Nanos

University of Glasgow ( email )

Adam Smith Business School
Glasgow, Scotland G12 8LE
United Kingdom

Patrick Verwijmeren (Contact Author)

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

Betty H.T. Wu

University of Glasgow Adam Smith Business School ( email )

Glasgow, Scotland
United Kingdom

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