ILLEGAL INSIDER TRADING: IS IT RAMPANT BEFORE CORPORATE TAKEOVERS? |
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| Authors: | Atul Gupta Lalatendu Misra |
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| Institution: | Bentley College, Waltham, MA 02254.;University of Texas at San Antonio, San Antonio, TX 78285. |
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| Abstract: | This paper investigates the role of insider trading as an explanation for the observed pre-announcement price run-ups for takeover targets. We hypothesize that if insider trading is a significant contributor to such price run-ups, then observed run-ups should be smaller for takeovers occurring after May 1986 (the beginning of the “insider trading scandal”) relative to those occurring prior to May 1986. The evidence suggests that insider trading is not, on average, a significant contributor to pre-announcement price run-ups. |
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