The information content of director trading: Evidence from acquisition announcements in Australia

Md Mosharraf Hossain, Richard Heaney and Jing Yu

Global Finance Journal, 2020, vol. 44, issue C

Abstract: In response to the long-standing debate about the information content of director trading, this study investigates the implications of director stock trading before an acquisition announcement by the company. Using a sample of 1249 acquisition announcements made by Australian acquiring firms between 2003 and 2012, we find that the stocks of acquiring firms with net director sales tend to underperform those of acquiring firms with net director purchases or with no director trades. This evidence supports the notion that director trading conveys useful information about the quality of subsequent acquisitions. Further, the informational effect of net director sales is most pronounced for acquisitions where the method of payment is stock, implying that the acquiring firm's stock may be overvalued.

Keywords: Director trading; Mergers and acquisitions (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:44:y:2020:i:c:s1044028318300942

DOI: 10.1016/j.gfj.2018.09.001

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