Do business ties generate private information? Evidence from institutional trading around M&A announcements

David J. Pedersen

Finance Research Letters, 2021, vol. 38, issue C

Abstract: Business ties generate private information for institutional investors related to a firm's 401(k) trustee. These investors strategically trade a bidder's stock around the announcement of a deal, reducing holdings ahead of value-destroying deals and increasing their positions before value-creating ones. Superior trading ability does not explain this behavior as these same investors do not exhibit similar trading behavior in firms with which they do not have a business tie.

Keywords: Business ties; Mergers and acquisitions; 401(k); Employee pension plans; Trustee (search for similar items in EconPapers)
JEL-codes: G23 G34 L14 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319307573

DOI: 10.1016/j.frl.2020.101462

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