Information content of directors' trading around acquisitions

Syed M.M. Shams, Huu Nhan Duong and Harminder Singh

Pacific-Basin Finance Journal, 2016, vol. 38, issue C, 177-193

Abstract: This paper investigates the patterns of directors' trades and returns around takeover announcements. We find that the pre-announcement net value (the difference between buy value and sell value) of directors' trading is positively related to acquirers' announcement period abnormal returns. This relation is stronger for private target acquisitions and for stock-financed acquisitions, when the information asymmetry between directors and outside investors is more pronounced. However, this relation does not hold for better governed and highly monitored acquirers. Our findings indicate opportunistic trading by directors prior to takeovers and highlight a significant role that corporate governance mechanism plays in restraining these opportunistic behaviors.

Keywords: Directors' trading; Abnormal returns; Information content (search for similar items in EconPapers)
JEL-codes: G12 G14 G34 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:38:y:2016:i:c:p:177-193

DOI: 10.1016/j.pacfin.2016.04.004

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