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Insider Trading Legislation and Acquisition Announcements: Do Laws Matter?

Ernst Maug and Abraham Ackerman
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Ernst Maug: Chair for Corporate Finance, University of Mannheim and Sonderforschungsbereich 504, Postal: L9, 1-2, 68131 Mannheim

No 07-34, Sonderforschungsbereich 504 Publications from Sonderforschungsbereich 504, Universität Mannheim, Sonderforschungsbereich 504, University of Mannheim

Abstract: In this paper we investigate how the enactment and enforcement of insider trading restrictions affect the way in which information about acquisitions is released before the actual acquisition announcement. We analyze a sample with almost 19,000 acquisition announcements from 48 countries. We find that insider trading legislation strongly affects the information revealed to the market in the runup phase before the announcement whereas the impact of subsequent enforcement actions by regulators is much weaker and mostly insignificant. The impact of insider trading legislation is stronger in countries with more effective judicial systems. We conclude that market participants rationally anticipate the degree of law enforcement.

Pages: 56 pages
Date: 2007-06-26
New Economics Papers: this item is included in nep-law and nep-reg
Note: Financial support from the Deutsche Forschungsgemeinschaft, SFB 504, at the University of Mannheim, is gratefully acknowledged.
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