Insider trading in rumored takeover targets |
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Authors: | Frederick Davis Hamed Khadivar Kuntara Pukthuanthong Thomas J Walker |
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Institution: | 1. Department of Finance, John Molson School of Business, Concordia University, Montreal, Quebec, Canada;2. Department of Finance, University of Missouri, Columbia, Missouri |
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Abstract: | We examine insider trading surrounding takeover rumors in a sample of 1,642 publicly traded US 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. |
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Keywords: | information asymmetry insider trading mergers and acquisitions takeover announcements takeover rumors |
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