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Article: Run-up of Acquirer's Stock in Public and Private Acquisitions
Title | Run-up of Acquirer's Stock in Public and Private Acquisitions |
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Authors | |
Keywords | Acquisitions Corporate Governance Insider Trading Private Equity |
Issue Date | 2011 |
Publisher | Blackwell 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? |
Abstract | Manuscript 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 Identifier | http://hdl.handle.net/10722/177786 |
ISSN | 2023 Impact Factor: 4.6 2023 SCImago Journal Rankings: 1.456 |
SSRN | |
ISI Accession Number ID | |
References |
DC Field | Value | Language |
---|---|---|
dc.contributor.author | Cumming, D | en_US |
dc.contributor.author | Li, D | en_US |
dc.date.accessioned | 2012-12-19T09:39:54Z | - |
dc.date.available | 2012-12-19T09:39:54Z | - |
dc.date.issued | 2011 | en_US |
dc.identifier.citation | Corporate Governance, 2011, v. 19 n. 3, p. 210-239 | en_US |
dc.identifier.issn | 0964-8410 | en_US |
dc.identifier.uri | http://hdl.handle.net/10722/177786 | - |
dc.description.abstract | Manuscript 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.language | eng | en_US |
dc.publisher | Blackwell Publishing Ltd. The Journal's web site is located at http://www.blackwellpublishing.com/journals/CORG | en_US |
dc.relation.ispartof | Corporate Governance | en_US |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.rights | The definitive version is available at www.blackwell-synergy.com | - |
dc.subject | Acquisitions | en_US |
dc.subject | Corporate Governance | en_US |
dc.subject | Insider Trading | en_US |
dc.subject | Private Equity | en_US |
dc.title | Run-up of Acquirer's Stock in Public and Private Acquisitions | en_US |
dc.type | Article | en_US |
dc.identifier.email | Li, D: lidan@hku.hk | en_US |
dc.identifier.authority | Li, D=rp01550 | en_US |
dc.description.nature | preprint | en_US |
dc.identifier.doi | 10.1111/j.1467-8683.2010.00838.x | en_US |
dc.identifier.scopus | eid_2-s2.0-79955709158 | en_US |
dc.identifier.hkuros | 222856 | - |
dc.relation.references | http://www.scopus.com/mlt/select.url?eid=2-s2.0-79955709158&selection=ref&src=s&origin=recordpage | en_US |
dc.identifier.volume | 19 | en_US |
dc.identifier.issue | 3 | en_US |
dc.identifier.spage | 210 | en_US |
dc.identifier.epage | 239 | en_US |
dc.identifier.isi | WOS:000290398800003 | - |
dc.publisher.place | United Kingdom | en_US |
dc.identifier.ssrn | 1837184 | - |
dc.identifier.scopusauthorid | Cumming, D=54790580000 | en_US |
dc.identifier.scopusauthorid | Li, D=36606414100 | en_US |
dc.identifier.citeulike | 9286559 | - |
dc.identifier.issnl | 0964-8410 | - |