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Bank Mergers and Insider Nontrading
Author(s) -
Madison Tom,
Roth Greg,
Saporoschenko Andy
Publication year - 2004
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.0732-8516.2004.00073.x
Subject(s) - insider , insider trading , business , exploit , profit (economics) , stock (firearms) , purchasing , mergers and acquisitions , tender offer , liability , finance , financial system , monetary economics , accounting , corporate governance , economics , shareholder , marketing , law , computer security , mechanical engineering , political science , computer science , microeconomics , engineering
Insiders with nonpublic information that their firms are acquisition targets can profit by purchasing their firms' stock or by delaying planned sales of their firms' stock. Under current securities laws, insiders who execute the former strategy expose themselves to civil and criminal liability, whereas insiders who execute the latter strategy do not. Using a sample of bank mergers, we find that target bank insiders significantly decrease both share purchases and share sales before merger announcements. These findings suggest that securities laws effectively deter some forms of illegal insider trading and that insiders exploit opportunities to profit legally from nonpublic information.