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Can Sanctions Reduce Insider Trading? The Experience of the USA in the 1980s

Can Sanctions Reduce Insider Trading? The Experience of the USA in the 1980s 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Asia-Pacific Journal of Financial Studies Wiley

Can Sanctions Reduce Insider Trading? The Experience of the USA in the 1980s

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Publisher
Wiley
Copyright
© 2010 Korean Securities Association
ISSN
2041-9945
eISSN
2041-6156
DOI
10.1111/j.2041-6156.2010.01018.x
Publisher site
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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.

Journal

Asia-Pacific Journal of Financial Studies – Wiley

Published: Aug 1, 2010

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