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Information content of directors' trading around acquisitions

Version 2 2024-06-03, 14:54
Version 1 2016-04-28, 09:57
journal contribution
posted on 2024-06-03, 14:54 authored by SMM Shams, HN Duong, Harminder SinghHarminder Singh
This paper investigates the patterns of directors' trades and returns around takeover announcements. We find that the pre-announcement net value (the difference between buy value and sell value) of directors' trading is positively related to acquirers' announcement period abnormal returns. This relation is stronger for private target acquisitions and for stock-financed acquisitions, when the information asymmetry between directors and outside investors is more pronounced. However, this relation does not hold for better governed and highly monitored acquirers. Our findings indicate opportunistic trading by directors prior to takeovers and highlight a significant role that corporate governance mechanism plays in restraining these opportunistic behaviors.

History

Journal

Pacific Basin Finance Journal

Volume

38

Pagination

177-193

Location

Amsterdam, The Netherlands

ISSN

0927-538X

eISSN

1879-0585

Language

English

Publication classification

C Journal article, C1 Refereed article in a scholarly journal

Copyright notice

2016, Elsevier

Publisher

ELSEVIER SCIENCE BV