 Sources of target stock price run-up prior to acquisitionsMatthew Brigida and Jeff Madura Journal of Economics and Business, 2012, vol. 64, issue 2, 185-198 Abstract: The anticipation of an acquisition attracts informed trading, which can cause a high run-up in the target stock price prior to an announced acquisition bid. Because research has shown that bidders do not reduce their bid price to compensate for a relatively high run-up, a larger run-up increases the cost of the acquisition to bidders. Our analysis determines that the target stock price run-up before an announced bid is higher for bidders that are not private equity firms, do friendly acquisitions, are from outside the U.S., rely on newly borrowed funds to finance the acquisition, rely on more investment bank advisors to facilitate the acquisition, and did not previously establish a toehold position in the target. It is also higher when targets are smaller, have listed options traded on them, and are in the technology field. Lastly, target run-up is lower since Sarbanes-Oxley. Keywords: Informed trading; Insider trading; Target stock price run-up (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:jebusi:v:64:y:2012:i:2:p:185-198 DOI: 10.1016/j.jeconbus.2011.11.003 Access Statistics for this article Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter More articles in Journal of Economics and Business from Elsevier |
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