A rundown of merger target runups

Marie Dutordoir; Evangelos Vagenas-Nanos; Patrick Verwijmeren; Betty Wu

doi:10.1111/fima.12331

A rundown of merger target runups

Marie Dutordoir, Evangelos Vagenas-Nanos, Patrick Verwijmeren, Betty Wu

Research output: Contribution to journal › Article › Academic › peer-review

Abstract

We provide evidence of a drastic drop in stock run-ups of U.S. target firms preceding merger and acquisition (M&A) announcements over the past decades. The median target run-up declines from approximately 10% in the 1980s to 2% after 2010. The trend in target run-ups cannot be fully explained by deal or firm characteristics associated with deal anticipation. However, it disappears after controlling for changes in the strength of U.S. insider trading regulation over the research period. Further analyses corroborate our conclusion that more stringent insider trading regulation is the most likely explanation for the reduction in target run-ups.

Original language	English
Pages (from-to)	487
Number of pages	518
Journal	Financial Management
Volume	50
Issue number	2
DOIs	https://doi.org/10.1111/fima.12331
Publication status	Published - 2021
Externally published	Yes

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title = "A rundown of merger target runups",

abstract = "We provide evidence of a drastic drop in stock run-ups of U.S. target firms preceding merger and acquisition (M&A) announcements over the past decades. The median target run-up declines from approximately 10% in the 1980s to 2% after 2010. The trend in target run-ups cannot be fully explained by deal or firm characteristics associated with deal anticipation. However, it disappears after controlling for changes in the strength of U.S. insider trading regulation over the research period. Further analyses corroborate our conclusion that more stringent insider trading regulation is the most likely explanation for the reduction in target run-ups.",

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AB - We provide evidence of a drastic drop in stock run-ups of U.S. target firms preceding merger and acquisition (M&A) announcements over the past decades. The median target run-up declines from approximately 10% in the 1980s to 2% after 2010. The trend in target run-ups cannot be fully explained by deal or firm characteristics associated with deal anticipation. However, it disappears after controlling for changes in the strength of U.S. insider trading regulation over the research period. Further analyses corroborate our conclusion that more stringent insider trading regulation is the most likely explanation for the reduction in target run-ups.

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DO - 10.1111/fima.12331

M3 - Article

SN - 0046-3892

VL - 50

SP - 487

JO - Financial Management

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A rundown of merger target runups

Abstract

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