I wish to thank Bill Christie (the Editor), Warren Bailey, Sandra Betton, Christa Bouwman, Arturo Bris, Melanie Cao, Joe Kushner, Richard Lyons, Derek Oler, Thomas Payne, Lynnette Purda, Eric Santor, an anonymous referee, and seminar participants at the 2004 Canadian Economics Association, the 2004 Western Economics Association, 2005 Southwestern Finance Association, 2005 European Financial Management Association, 2005 Northern Finance Association, 2006 RS-De Groote Luncheon Seminar, the University of Calgary, the University of Western Ontario, Queen's University, Wilfrid Laurier University, the Ontario Securities Commission, Market Regulation Services Inc., and the Bank of Canada for many insightful comments on previous drafts of the paper. Maksym Padalko provided excellent research assistance. Wendy Jennings provided editorial assistance. All errors and omissions remain my own.
Prebid Run-Ups Ahead of Canadian Takeovers: How Big Is the Problem?
Version of Record online: 25 NOV 2009
© 2009 Financial Management Association International
Volume 38, Issue 4, pages 699–726, Winter 2009
How to Cite
King, M. R. (2009), Prebid Run-Ups Ahead of Canadian Takeovers: How Big Is the Problem?. Financial Management, 38: 699–726. doi: 10.1111/j.1755-053X.2009.01053.x
- Issue online: 25 NOV 2009
- Version of Record online: 25 NOV 2009
This paper studies the price-volume dynamics ahead of takeover announcements for 399 Canadian firms from 1985 to 2002. I find evidence consistent with insiders trading illegally, creating both abnormal returns (ARs) and abnormal turnover (AT) ahead of the announcement. The rise in AT begins far ahead of the actual announcement, accompanied by ARs in the last five trading days, consistent with more informed trading. Data on disclosed insider trading indicate a sharp increase in volume prior to the takeover announcement, suggesting that insiders make use of private information. This study confirms the importance of AT for triggering an insider trading investigation.