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What do abnormal investor trading patterns around corporate mergers indicate? Further evidence from the Korean M&A market

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  • Chune Young Chung

Abstract

This article examines the abnormal trading patterns by investor types around corporate mergers in the Korean financial market. Extending Han and Chung (2013), I investigate standardized abnormal net buy (SANB) of institutional and individual investors around both good and bad merger announcements based on unique daily trading data. I find that institutional investors abnormally buy (sell) their shares on a bidding firm before the announcement of a good (bad) merger, while individual investors abnormally sell (buy) the shares. I also find that institutional investors continue to abnormally buy (sell) their shares on a bidding firm even after the announcement of a good (bad) merger, while individual investors continue to abnormally sell (buy) the shares. Since good (bad) mergers exhibit positive (negative) cumulative abnormal returns around the announcement, the findings support the evidence of informed and/or sophisticated (uninformed and/or unsophisticated) trading by institutional (individual) investors.

Suggested Citation

  • Chune Young Chung, 2014. "What do abnormal investor trading patterns around corporate mergers indicate? Further evidence from the Korean M&A market," Applied Economics Letters, Taylor & Francis Journals, vol. 21(15), pages 1045-1049, October.
    • Handle: RePEc:taf:apeclt:v:21:y:2014:i:15:p:1045-1049
    DOI: 10.1080/13504851.2014.907471
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