Does insider trading explain price run‐up ahead of takeover announcements?

Aspris, Angelo; Foley, Sean; Frino, Alessandro

doi:10.1111/acfi.12003

Cited by 24 publications

(30 citation statements)

References 37 publications

(76 reference statements)

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“…First, Breunig, Menezes and Tan (2012) show that whether the Australian competition regulator approves a merger is related to the qualitative information on a Public Competition Assessment. Second, Aspris, Foley and Frino (2014) show that toeholds are the main reason (rather than insider trading) for a pre-bid run-up for Australian takeover targets. 26 There are several corporate governance studies conducted in other areas, such as the informativeness of disclosures (Beekes, Brown and Zhang, 2015); probability of default (Schultz, Tan, and Walsh, 2015); firm performance (Christensen, Routledge, and Stewart, 2015); and ownership structure (Schultz, Tian and Twite, 2013;Xu, Liu and Wang, 2015).…”

Section: Corporate Governancementioning

confidence: 94%

A contemporary view of corporate finance theory, empirical evidence and practice

Faff

Gray

Tan

2016

Australian Journal of Management

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This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals. Abstract This paper uses a survey of Australian Corporate Treasurers to shed light on the gap between the theory and practice of corporate finance in Australia. Seven areas are examined: capital structure, payout policy, cash holdings, initial public offerings, seasoned equity offering, mergers and acquisitions, and corporate governance. We also exploit the Global Financial Crisis to examine the effect of liquidity shocks on a firm's capital structure choices. We then compare our Australian survey results with results from a comprehensive U.S. survey conducted by Graham and Harvey (2001). Our survey shows that the board of directors play the most important role in determining capital structure decisions and that corporate treasurers play the most important role in cash holding decisions. This contrasts with the academic literature that has typically focused on the role of CEO in both capital structure and cash holdings decisions. In addition, our respondents do not view the tax advantage of interest deductibility to be of first order of importance for debt issuance choices, which contrasts with most of the U.S. empirical studies. Finally, we juxtapose the theory-practice perspective, with a review of the most recent five years (2011)(2012)(2013)(2014)(2015) of corporate finance research published in the leading Asia Pacific Basin finance journals.

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Section: Corporate Governancementioning

confidence: 94%

A contemporary view of corporate finance theory, empirical evidence and practice

Faff

Gray

Tan

2016

Australian Journal of Management

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“…A closely related study, Aspris et al (2014), tests the power of substantial shareholder trades to predict pre-bid price runups. The pre-bid trading activity they assess includes bidder trades that result in substantial shareholder status in the target firm (i.e.…”

Section: Review Of Literature and Hypothesesmentioning

confidence: 99%

“…Specifically, Bishop (1991) argues that toehold acquisitions revise the market's anticipation of a takeover bid, while not necessarily signalling a bid. Aspris et al (2014) measure substantial shareholder activity in two ways; first, they study an acquirer's toehold acquisition, that is, an acquisition reaching five percent of the firm's outstanding interest (by definition, becoming a substantial shareholder), and use a dichotomous variable to indicate this occurrence. Second, they consider trading by other substantial shareholders, again measuring this through a dichotomous variable.…”

Section: Review Of Literature and Hypothesesmentioning

confidence: 99%

“…If a substantial shareholder has access to information about a future bid and details of the bid in particular the bid premium, their trades may also signal this information. However, Aspris et al (2014) assert that substantial shareholder trading is not predictive of a takeover bid where trading is measured by its presence. We challenge this using a more comprehensive measure of trading and by categorising the substantial shareholder group into institutional, managerial, financial and other to better understand the trading incentive.…”

Section: Introductionmentioning

confidence: 99%

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The Informativeness of Substantial Shareholder Trading in the Lead Up to a Takeover Bid

Chang

Rosa

2016

SSRN Journal

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Although substantial shareholders are often considered quasi-insiders, not much is known about the information they possess, especially around changes in corporate control events. We examine whether substantial shareholders in target firms possess information about future takeover activity and if they have such information, whether they trade opportunistically on it. The results show increased purchases by substantial shareholders close to a takeover announcement where these trades predict the likelihood of takeovers. However, they do not predict bid premiums nor other deal characteristics. A comparison of different types of substantial shareholders indicates that institutional shareholder trades are better indicators of takeover likelihood relative to the trades of managerial shareholders. These findings imply that substantial shareholders are indeed quasi insiders who have an informational advantage over other shareholders about future takeover activity and they use this advantage for their own benefit.

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“…Noted examples include Gaunt (2004), which examines the Fama French three-factor model to 2000 in Australia, 1 Chai et al (2013), who test the role of a liquidity factor in Australia, and Brown et al (2014), who examine market reactions to mining analyst reports. Additional recent examples drawing upon both sources of data include Aspris et al (2014) and Basu and Forbes (2014).…”

Section: Introductionmentioning

confidence: 99%

Merging time‐series Australian data across databases: challenges and solutions

Katselas

Sidhu

2015

Accounting & Finance

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This study discusses the differences in company identification across sources of Australian data and raises important issues which should be considered prior to merging across databases. In particular, we show that the practice among accounting databases of overwriting prior identifiers used by a given company, with its most recent, results in failure to match data which actually exists. We suggest a method for reconciling these differences and show that our method results in a match rate of 97 percent with the Aspect company identification file, and 94 percent after missing accounting data is considered. This contrasts with a match rate of only 71 percent when performing a direct merge.

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Does insider trading explain price run‐up ahead of takeover announcements?

Cited by 24 publications

References 37 publications

A contemporary view of corporate finance theory, empirical evidence and practice

A contemporary view of corporate finance theory, empirical evidence and practice

The Informativeness of Substantial Shareholder Trading in the Lead Up to a Takeover Bid

Merging time‐series Australian data across databases: challenges and solutions

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