The Effect of Illegal Insider Trading on Takeover Premia *

Meulbroek, Lisa K.; Hart, Carolyn

doi:10.1023/a:1009755324212

Cited by 43 publications

(18 citation statements)

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“…a particular stock manipulated on a particular day) rather than cases (containing multiple instances of manipulation) our sample is better suited to addressing the detection bias than that of Aggarwal and Wu (2006) and Meulbroek and Hart (1997). This is because only a relatively small proportion of the instances of manipulation would have been 'directly'…”

mentioning

confidence: 99%

“…Meulbroek and Hart (1997) view this as an endogeneity problem in addressing the question of whether insider trading leads to larger takeover premia using a sample of illegal insider trading cases prosecuted by the SEC. If takeovers with higher premia are more likely to be investigated by the SEC for insider trading then high premia takeovers will be overrepresented in the detected insider trading sample making it difficult to disentangle any effect of insider trading from effects caused by the detection process.…”

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confidence: 99%

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Measuring closing price manipulation

Comerton‐Forde

Putniņš

2011

Journal of Financial Intermediation

130

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confidence: 99%

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confidence: 99%

Measuring closing price manipulation

Comerton‐Forde

Putniņš

2011

Journal of Financial Intermediation

130

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“…Panel A also illustrates the case where the event period actually ends before the announcement date, perhaps due to information leakages or insider trading, as in Meulbroek and Hart (1997). Panel B of Figure 1 illustrates a decrease in systematic risk during the event period, with post-event systematic risk lower than the pre-event level.…”

Section: P Imentioning

confidence: 99%

A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

DeGennaro

Cyree

2001

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract: The authors generalize traditional event-study techniques to allow for event-induced parameter shifts, shifting variances, and firm-specific event periods. Their method, which nests traditional methods, also permits systematic risk to change gradually during the event period and exit the period at higher or lower levels. The authors use their approach to study 132 banks that acquired other institutions between 1989 and 1995. The authors find a significant change in the systematic risk of the acquiring firms, significant ARCH effects, and an event period that ends before the date of the announcement. None of these results is detectable using conventional methods. These results imply that (1) event studies that cannot account for information leakage may be biased, and (2) changes in systematic risk can occur in the absence of abnormal returns, and (3) regulators, investors and bank managers must evaluate each acquisition on its own merits; reliance on averages can mask important distinctions across acquisitions. Terms of use: Documents inJEL classification: G14, G21, G34

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“…Shareholders of bidding firms, however, realise smaller gains (Asquith, Bruner, & Mullins, 1983) and losses (Billett & Qian, 2008;Doeswijk & Hemmes, 2001;Morck, Shleifer, & Vishny, 1990;Mulherin & Boone, 2000). Furthermore, substantial pre-announcement price run-ups often occur in target firm stocks and sometimes in acquiring firm stocks due to insider trading (IT) or market speculation (Aitken & Czernkowski, 1992;Keown & Pinkerton, 1981;Meulbroek, 1992;Meulbroek & Hart, 1997;Schwert, 1996). Banerjee and Eckard (2001) claimed that insiders captured all merger gains prior to public announcements in the first merger wave of 1897-1903. IT is a misappropriation of private information that is unfair to the general public (Cao, Field, & Hanka, 2004;Chakravarty & McConnell, 1999;Jeng, Metrick, & Zeckhauser, 2003).…”

Section: Introductionmentioning

confidence: 99%

Merger Announcement Effects and the Amendment of Insider Trading Laws in Brazil

Qiu¹,

Balbinotti²

2016

JMAA

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Although Brazil has a long history of having insider trading laws (IT laws) in place and became the first emerging country to enforce the IT laws (Bhattacharya & Daouk, 2002), criminal sanctions and hefty monetary penalties were only made possible by the amendment of its laws against IT on October 31, 2001. We study the stock price effects of merger announcements made by 151 firms over two periods, before and after the change of IT laws. Our empirical results suggest that target firms attained positive price run-ups in pre-announcement windows before, but not after, the legal regime change. While acquiring firms had strong positive pre-announcement reactions in both legal regimes, the abnormal returns (AR) decreased in the more stringent legal regime. These results indicate that more stringent IT laws may deter IT and improve market efficiency in an emerging country.

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The Effect of Illegal Insider Trading on Takeover Premia *

Cited by 43 publications

References 0 publications

Measuring closing price manipulation

Measuring closing price manipulation

A Generalized Method for Detecting Abnormal Returns and Changes in Systematic Risk

Merger Announcement Effects and the Amendment of Insider Trading Laws in Brazil

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