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Do Bidder Managers Knowingly Pay Too Much for Target Firms?

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Author Info
Seyhun, H Nejat
Abstract

This study examines the stock transactions of top managers of bidder firms for their personal accounts as signals about their motivations regarding corporate takeovers. Overall, the data indicate that, prior to takeover announcements, top managers increase their net purchases rather than sales. Bidder managers purchase more shares when the stock price reaction to the takeover announcement is large and positive than when it is large and negative. Bidder managers are also more optimistic in cash offers than in equity offers. Overall, the evidence does not appear to support the hypothesis that bidder managers knowingly pay too much for target firms. Copyright 1990 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Business.

Volume (Year): 63 (1990)
Issue (Month): 4 (October)
Pages: 439-64
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Handle: RePEc:ucp:jnlbus:v:63:y:1990:i:4:p:439-64

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  1. Adriana Korczak & Piotr Korczak & Meziane Lasfer, 2009. "To Trade or Not to Trade: The Strategic Trading of Insiders around News Announcements," Bristol Economics Discussion Papers 09/613, Department of Economics, University of Bristol, UK. [Downloadable!]
  2. Del Brio, Esther & Elías Tobar, José, 2005. "Rentabilidad a Corto Plazo de los Insiders en los Mercados Español y Británico," Documentos de Trabajo "Nuevas Tendencias en Dirección de Empresas". Working Papers "New Trends on Business Administration". 2005-10, Interuniversitary Doctorate Program "New Trends on Business Administration", Universities of Valladolid, Burgos and Salamanca (Spain). Programa de Doctorado Interuniversitario "Nuevas Tendencias en Di. [Downloadable!]
  3. Esther Brio & Javier Perote, 2007. "What Enhances Insider Trading Profitability?," Atlantic Economic Journal, International Atlantic Economic Society, vol. 35(2), pages 173-188, June. [Downloadable!] (restricted)
  4. Steven Huddart & Bin Ke & Charles Shi, 2005. "Jeopardy, non-public information, and insider trading around SEC 10-K and 10-Q filings," Law and Economics 0502001, EconWPA, revised 03 Jul 2005. [Downloadable!]
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  5. Juha-Pekka Kallunki & Henrik Nilsson & Janne Peltoniemi, 2009. "Regulated and unregulated insider trading around earnings announcements," European Journal of Law and Economics, Springer, vol. 27(3), pages 285-308, June. [Downloadable!] (restricted)
  6. Malcolm Arnold & David Parker, 2009. "Stock market perceptions of the motives for mergers in cases reviewed by the UK competition authorities: an empirical analysis," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 30(4), pages 211-233. [Downloadable!]
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