I only fear when I hear: How media affects insider trading in takeover targets

Research Output

We study how target firm insiders respond to Wall Street Journal articles referring to illegal insider trading in past mergers. Such articles lead to target insider share purchases before bid announcement to drop by 75%. This effect is stronger nearer the bid announcement and increases with article visibility. It remains significant after controlling for public enforcement intensity, but is weakened by the greater potential for profitable trading. Our results suggest insider trading articles temporarily heighten the perception of litigation and reputation risks. Overall, our study indicates that such articles have a meaningful short-term deterrence effect on opportunistic insider trading, and highlights the disciplinary role of the media.

Type:

Article
Date:

20 April 2022
Publication Status:

Published
DOI:

10.1016/j.jempfin.2022.04.004
ISSN:

0927-5398
Funders:

Edinburgh Napier Funded

http://researchrepository.napier.ac.uk/output/2865541 Aleksanyan, M., Danbolt, J., Siganos, A., & Wu, B. (2022). I only fear when I hear: How media affects insider trading in takeover targets. Journal of Empirical Finance, 67, 318-342. https://doi.org/10.1016/j.jempfin.2022.04.004

Citation

Aleksanyan, M., Danbolt, J., Siganos, A., & Wu, B. (2022). I only fear when I hear: How media affects insider trading in takeover targets. Journal of Empirical Finance, 67, 318-342. https://doi.org/10.1016/j.jempfin.2022.04.004