 Hedge funds in M&A deals: Is there exploitation of insider information?Rui Dai, Nadia Massoud, Debarshi Nandy and Anthony Saunders Journal of Corporate Finance, 2017, vol. 47, issue C, 23-45 Abstract: This paper investigates trading patterns in target and acquirer firms prior to public announcement of M&A deals, a corporate event in which group based co-offence has been anecdotally documented. Our analysis differentiates whether such trading is primarily conducted by hedge funds with short-term investment horizons as opposed to other short horizon investors or hedge funds and institutional investors with long-term horizons, in both the equity and derivatives markets. Our results are consistent with exploitation of M&A deal related information prior to the deal's public announcement. In particular we find that the greater the likelihood of insider information leakage, the greater the short-term hedge fund holdings. We consider several alternative explanations, such as those related to the short-term hedge fund's skill in identifying profitable trades' ex-ante; our results seem inconsistent with such alternative explanations. Keywords: Short-term hedge funds; Information leakage; Insider information; Merger and acquisitions; Short-selling; Long target holdings (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:47:y:2017:i:c:p:23-45 DOI: 10.1016/j.jcorpfin.2017.08.001 Access Statistics for this article Journal of Corporate Finance is currently edited by A. Poulsen and J. Netter More articles in Journal of Corporate Finance from Elsevier |
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