Information content of directors' trading around acquisitions

Article

Shams, Syed M. M., Duong, Huu Nhan and Singh, Harminder. 2016. "Information content of directors' trading around acquisitions." Pacific-Basin Finance Journal. 38, pp. 177-193. https://doi.org/10.1016/j.pacfin.2016.04.004
Article Title

Information content of directors' trading around acquisitions

ERA Journal ID32913
Article CategoryArticle
AuthorsShams, Syed M. M. (Author), Duong, Huu Nhan (Author) and Singh, Harminder (Author)
Journal TitlePacific-Basin Finance Journal
Journal Citation38, pp. 177-193
Number of Pages17
Year2016
PublisherElsevier
Place of PublicationNetherlands
ISSN0927-538X
Digital Object Identifier (DOI)https://doi.org/10.1016/j.pacfin.2016.04.004
Web Address (URL)http://www.sciencedirect.com/science/article/pii/S0927538X16300440
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.

Keywordsdirectors' trading; abnormal returns; information content
ANZSRC Field of Research 2020350299. Banking, finance and investment not elsewhere classified
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Byline AffiliationsSchool of Commerce
Monash University
Deakin University
Institution of OriginUniversity of Southern Queensland
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