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Purpose -The purpose of this paper is to examine changes in short-sale transactions of target firms and acquiring firms around merger and acquisition (M&A) announcements using daily short-sale transaction data from the New York stock exchange and NASDAQ. The paper further aims to investigate the link between short-sale transactions and trading costs. Design/methodology/approach -Two abnormal short-sale measures are developed. Two regression models based on the two short-sale measures are constructed and ordinary least squares is used to estimate the regressions. Two samples to test bid-ask spreads (BAS) before and after M&A announcements t-test are used. Findings -The paper finds that target firms experience significant excess short sales (ES) from day 2 1 to day þ 7; while acquiring firms experience significant ES from day 0 to day þ 20. For acquiring firms, the five-day pre-announcement abnormal short sale is negatively related to the announcement day return and is positively related to post-announcement return. Such a relationship for target firms is not observed. For target firms, it is found that changes in short activity are not significantly related to changes in trading cost. For acquiring firms, short activity changes are positively related to quoted spreads and percentage quoted spreads. The short-sale activity changes are negatively related to effective spreads.Research limitations/implications -The paper is a first step to understanding whether short sales affect market liquidity around M&A announcements; therefore restriction is necessary. Additional research can be done which should extend the current study to include the options market. Practical implications -From the results, the paper cannot conclude that short sellers are informed traders around M&A announcements. Therefore restrictions on short sales around M&A announcements may not be warranted. Originality/value -The paper fills an important blank in the existing literature by examining short-sale transactions around M&A announcements. Such an investigation is of particular interest to market regulators as they try to update the short-sale rules.

Background: In the past couple of years, China's futures exchanges have launched nighttime trading sessions. Methods: We use daily data from 23 commodity futures to investigate the impact of this important policy change. Results: Our findings suggest that the launching of nighttime trading effectively improved the efficiency of futures prices and reduced the volatility of prices. The normality of returns improves during the post-nighttime trading period. As documented in the literature, the interactions between trading activities (i.e., trading volume and open interest) and volatility conform better to the observed patterns in developed markets. Conclusions: This study provides sound evidence that China has taken steady steps toward its goal of establishing price-setting power in key commodities on world financial markets.

PurposeThe purpose of this paper is to examine trading costs of both acquiring firms and target firms differentiated by method of payment, mode of acquisition, and deal attitude around merger and acquisition (M&A) announcements. The author calculates four spread measures of trading costs: quoted spread, percentage quoted spread, effective spread, and percentage effective spread.Design/methodology/approachDifferences in spreads differentiated by M&A characteristics are calculated and two‐sample t‐tests applied. A linear regression model is developed to test whether changes in trading costs are related to acquiring firm's post‐merger price performance. The regression is estimated by OLS method.FindingsIt is found that various methods of payment affect the spreads of target firm differently on certain days around M&A announcement. For acquiring firms, significant differences are found in spreads between cash offers and stock offers, and between stock offers and mix offers. Significant difference was not found in spreads between cash offers and mix offers. The mode of acquisition affects the bid‐ask spreads of target firms only, but not those of acquiring firms. Deal attitudes affect the spreads of target firms on and after M&A announcements. It was also found that all four spread measures are significantly linked to acquiring firms’ post‐merger daily returns.Research limitations/implicationsFurther study can be done on mechanisms through which M&A characteristics impact trading costs.Practical implicationsThis study suggests that M&A characteristics affect firms’ spreads and that changes in spreads need to be accounted for in explaining acquiring firms’ post‐merger daily returns.Originality/valueThe paper fills in an important gap in existing literature by examining trading costs of acquiring firms around M&A announcements. It provides additional evidence on the anomaly of acquiring firm's negative post‐merger returns. The paper is intended to help improve the understanding of trading costs and the behavior of the market participants in response to a major corporate event.

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