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Article: Run-up of Acquirer's Stock in Public and Private Acquisitions

TitleRun-up of Acquirer's Stock in Public and Private Acquisitions
Authors
KeywordsAcquisitions
Corporate Governance
Insider Trading
Private Equity
Issue Date2011
PublisherBlackwell Publishing Ltd. The Journal's web site is located at http://www.blackwellpublishing.com/journals/CORG
Citation
Corporate Governance, 2011, v. 19 n. 3, p. 210-239 How to Cite?
AbstractManuscript Type: Empirical Research Question/Issue: This paper empirically examines whether there is pre-announcement movement of an acquirer's share price and trading volume prior to the announcement of acquisitions in ways consistent with insider trading. Prior papers focus on insider trading of a target's stock; our paper differs by examining for the first time run-up of acquirer's stock, and considers both public and private acquisitions, including private-equity backed acquisitions. Research Findings/Insights: Acquisition announcements generate predictable movements in the price of the acquirer's stock. Pre-announcement trading in acquirer's stock is more likely to be attributable to insider trading when the pre-announcement price changes match the expected post-announcement acquirer returns. Based on a sample of Canadian acquirers and public and private acquisition targets from Canada, the US and 31 other countries over the years 1991-2008, we find evidence consistent with insider trading of acquirer's stock. Theoretical/Academic Implications: The evidence consistent with insider trading in this paper is limited to specific situations and is far from generalizable to all types of acquisition announcements. Post-announcement returns are typically negative for high Tobin's q acquirers, stock transactions, and foreign targets, but positive for private equity-backed private targets. We find economically and statistically significant evidence that pre-announcement run-ups move in ways that match these expected post-announcement effects. Pre-announcement movement in acquirer's stock largely depends on the type of acquisition announcement. Practitioner/Policy Implications: Our findings have significant policy implications for the allocation of surveillance efforts for initiating insider trading investigations. © 2011 Blackwell Publishing Ltd.
Persistent Identifierhttp://hdl.handle.net/10722/177786
ISSN
2015 Impact Factor: 2.169
2015 SCImago Journal Rankings: 1.119
SSRN
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorCumming, Den_US
dc.contributor.authorLi, Den_US
dc.date.accessioned2012-12-19T09:39:54Z-
dc.date.available2012-12-19T09:39:54Z-
dc.date.issued2011en_US
dc.identifier.citationCorporate Governance, 2011, v. 19 n. 3, p. 210-239en_US
dc.identifier.issn0964-8410en_US
dc.identifier.urihttp://hdl.handle.net/10722/177786-
dc.description.abstractManuscript Type: Empirical Research Question/Issue: This paper empirically examines whether there is pre-announcement movement of an acquirer's share price and trading volume prior to the announcement of acquisitions in ways consistent with insider trading. Prior papers focus on insider trading of a target's stock; our paper differs by examining for the first time run-up of acquirer's stock, and considers both public and private acquisitions, including private-equity backed acquisitions. Research Findings/Insights: Acquisition announcements generate predictable movements in the price of the acquirer's stock. Pre-announcement trading in acquirer's stock is more likely to be attributable to insider trading when the pre-announcement price changes match the expected post-announcement acquirer returns. Based on a sample of Canadian acquirers and public and private acquisition targets from Canada, the US and 31 other countries over the years 1991-2008, we find evidence consistent with insider trading of acquirer's stock. Theoretical/Academic Implications: The evidence consistent with insider trading in this paper is limited to specific situations and is far from generalizable to all types of acquisition announcements. Post-announcement returns are typically negative for high Tobin's q acquirers, stock transactions, and foreign targets, but positive for private equity-backed private targets. We find economically and statistically significant evidence that pre-announcement run-ups move in ways that match these expected post-announcement effects. Pre-announcement movement in acquirer's stock largely depends on the type of acquisition announcement. Practitioner/Policy Implications: Our findings have significant policy implications for the allocation of surveillance efforts for initiating insider trading investigations. © 2011 Blackwell Publishing Ltd.en_US
dc.languageengen_US
dc.publisherBlackwell Publishing Ltd. The Journal's web site is located at http://www.blackwellpublishing.com/journals/CORGen_US
dc.relation.ispartofCorporate Governanceen_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.rightsThe definitive version is available at www.blackwell-synergy.com-
dc.subjectAcquisitionsen_US
dc.subjectCorporate Governanceen_US
dc.subjectInsider Tradingen_US
dc.subjectPrivate Equityen_US
dc.titleRun-up of Acquirer's Stock in Public and Private Acquisitionsen_US
dc.typeArticleen_US
dc.identifier.emailLi, D: lidan@hku.hken_US
dc.identifier.authorityLi, D=rp01550en_US
dc.description.naturepreprinten_US
dc.identifier.doi10.1111/j.1467-8683.2010.00838.xen_US
dc.identifier.scopuseid_2-s2.0-79955709158en_US
dc.identifier.hkuros222856-
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-79955709158&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume19en_US
dc.identifier.issue3en_US
dc.identifier.spage210en_US
dc.identifier.epage239en_US
dc.identifier.isiWOS:000290398800003-
dc.publisher.placeUnited Kingdomen_US
dc.identifier.ssrn1837184-
dc.identifier.scopusauthoridCumming, D=54790580000en_US
dc.identifier.scopusauthoridLi, D=36606414100en_US
dc.identifier.citeulike9286559-

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