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Characteristics of takeover targets that trigger insider trading investigations

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  • Jeff Madura
  • Marek Marciniak

Abstract

We assess trading and non-trading characteristics of takeovers that trigger Securities and Exchange Commission (SEC) investigations of illegal insider trading. We find that targets with more pronounced abnormal stock price run-ups (especially in long pre-bid windows) and abnormal trading volume (especially in short pre-bid windows) trigger an SEC investigation. We also find that an SEC investigation is more likely when the takeover is characterized by a foreign bidder, a public bidder and a relatively large target. Thus, non-trading characteristics complement the trading characteristics in explaining what triggers an SEC investigation of insider trading.

Suggested Citation

  • Jeff Madura & Marek Marciniak, 2014. "Characteristics of takeover targets that trigger insider trading investigations," Applied Financial Economics, Taylor & Francis Journals, vol. 24(1), pages 1-18, January.
    • Handle: RePEc:taf:apfiec:v:24:y:2014:i:1:p:1-18
    DOI: 10.1080/09603107.2013.854298
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    Cited by:

    1. Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2016. "Market Abuse Directive and Insider Trading: Evidence from Italian Tender Offers," Working Paper series 16-16, Rimini Centre for Economic Analysis.
    2. Riccardo Ferretti & Pierpaolo Pattitoni & Roberto Patuelli, 2021. "Insider Trading and the Market Abuse Directive: Are Voluntary and Mandatory Takeover Bids Different?," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 7(3), pages 461-485, November.

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