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Illegal Insider Trading: Is It Rampant before Corporate Takeovers?

Author

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  • Gupta, Atul
  • Misra, Lalatendu

Abstract

This paper investigates the role of insider trading as an explanati on for the observed preannouncement price run-ups for takeover targets. The authors hypothesize that if insider trading is a significant cont ributor to such price run-ups, then observed run-ups should be small 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 preannouncement price run-ups. Copyright 1988 by MIT Press.

Suggested Citation

  • Gupta, Atul & Misra, Lalatendu, 1988. "Illegal Insider Trading: Is It Rampant before Corporate Takeovers?," The Financial Review, Eastern Finance Association, vol. 23(4), pages 453-464, November.
    • Handle: RePEc:bla:finrev:v:23:y:1988:i:4:p:453-64
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    Citations

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    Cited by:

    1. Nadia Linciano, 2003. "The Effectiveness of Insider Trading Regulation in Italy. Evidence from Stock-Price Run-Ups Around Announcements of Corporate Control Transactions," European Journal of Law and Economics, Springer, vol. 16(2), pages 199-218, September.
    2. Inga Chira & Jeff Madura, 2013. "Impact Of The Galleon Case On Informed Trading Before Merger Announcements," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 36(3), pages 325-346, September.
    3. Jordan Dan & Hoppe Paul, 2008. "Is The Mergerstat Control Premium Overstated?," Journal of Business Valuation and Economic Loss Analysis, De Gruyter, vol. 3(1), pages 1-13, March.
    4. de Bonviller, Simon & Zuo, Alec & Wheeler, Sarah Ann, 2019. "Is there evidence of insider trading in Australian water markets?," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 60(2), April.
    5. Dan Jordan & Donald Wort, 2009. "A test of bear market mergerstat control premiums," Review of Quantitative Finance and Accounting, Springer, vol. 33(1), pages 27-36, July.
    6. Anderson, Hamish D. & Rose, Lawrence C. & Cahan, Steven F., 2006. "Differential shareholder wealth and volume effects surrounding private equity placements in New Zealand," Pacific-Basin Finance Journal, Elsevier, vol. 14(4), pages 367-394, September.

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