Can sanctions reduce insider trading? The experience of the USA in the 1980s

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Abstract

This paper empirically examines whether insider trading sanctions in the USA in the 1980s reduced insider trading in advance of mergers and acquisitions (M&A). Using a sample consisting of 291 firms, both merged and non-merged in 1983 and 1989, I measured insider trading volume and the 'news media effect.' I conclude that the sanctions reduced insider trading on average, and also resulted in larger noise trading on M&A-related news and rumors. No evidence was found that insiders were increasingly camouflaging their trades by concentrating them on days on that they knew trading volume would be abnormally high, such as on days containing M&A-related news.

Original languageEnglish
Pages (from-to)417-444
Number of pages28
JournalAsia-Pacific Journal of Financial Studies
Volume39
Issue number4
DOIs
StatePublished - Aug 2010

Keywords

  • Abnormal trading
  • Insider-trading
  • Insider-trading sanctions
  • Mergers and acquisitions
  • News media effect

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