Insider Trading in Rumored Takeover Targets

Forthcoming, European Financial Management

49 Pages Posted: 10 Aug 2020

See all articles by Frederick James Davis

Frederick James Davis

Concordia University

Hamed Khadivar

Department of Finance, Université du Québec à Montréal

Kuntara Pukthuanthong

University of Missouri, Columbia

Thomas John Walker

Concordia University, Quebec - Department of Finance

Date Written: July 10, 2020

Abstract

We examine insider trading surrounding takeover rumors in a sample of 1,642 publicly traded U.S. firms. Using difference-in-differences regressions, we find that insider net purchases increase within the year prior to the first publication of a takeover rumor, particularly when rumor articles are either accurate (lead to a takeover announcement) or informative (provide substantial justification for the rumor’s publication). Moreover, we find abnormal insider trading to be a significant predictor of takeover announcements occurring within the following year. Finally, passive net purchasing (i.e., selling less rather than buying more) is more pronounced among managing insiders than among non-managing insiders.

Keywords: Insider trading, takeover rumors, information asymmetry, takeover announcements, mergers and acquisitions

JEL Classification: G14; G18; G34; K22

Suggested Citation

Davis, Frederick James and Khadivar, Hamed and Pukthuanthong, Kuntara and Walker, Thomas John, Insider Trading in Rumored Takeover Targets (July 10, 2020). Forthcoming, European Financial Management, Available at SSRN: https://ssrn.com/abstract=3648668

Frederick James Davis

Concordia University ( email )

Montreal, Quebec
Canada

Hamed Khadivar

Department of Finance, Université du Québec à Montréal ( email )

Case postale 8888
Succursale Centre-ville
Montreal, Quebec H3C 3P8
Canada
5147549199 (Phone)

Kuntara Pukthuanthong (Contact Author)

University of Missouri, Columbia ( email )

Robert J. Trulaske, Sr. College of Business
403 Cornell Hall
Columbia, MO 65211
United States
6198076124 (Phone)

HOME PAGE: https://www.kuntara.net/

Thomas John Walker

Concordia University, Quebec - Department of Finance ( email )

Montreal, Quebec H3G 1M8
Canada

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