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Prebid Run‐Ups Ahead of Canadian Takeovers: How Big Is the Problem?
Author(s) -
King Michael R.
Publication year - 2009
Publication title -
financial management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.647
H-Index - 68
eISSN - 1755-053X
pISSN - 0046-3892
DOI - 10.1111/j.1755-053x.2009.01053.x
Subject(s) - insider trading , insider , business , inside information , alternative trading system , monetary economics , algorithmic trading , volume (thermodynamics) , private information retrieval , high frequency trading , trading strategy , financial economics , economics , finance , law , computer security , political science , computer science , physics , quantum mechanics
This paper studies the price‐volume dynamics ahead of takeover announcements for 399 Canadian firms from 1985 to 2002. I find evidence consistent with insiders trading illegally, creating both abnormal returns (ARs) and abnormal turnover (AT) ahead of the announcement. The rise in AT begins far ahead of the actual announcement, accompanied by ARs in the last five trading days, consistent with more informed trading. Data on disclosed insider trading indicate a sharp increase in volume prior to the takeover announcement, suggesting that insiders make use of private information. This study confirms the importance of AT for triggering an insider trading investigation .