A Run-Down of Merger Target Run-Ups
45 Pages Posted: 4 Dec 2017 Last revised: 20 Apr 2018
Date Written: April 11, 2018
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: Suggested Citation