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

Aleksanyan, Mark; Danbolt, Jo; Siganos, Antonios; Wu, Betty

Abstract

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.

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

• Journal Article Type: Article
• Acceptance Date: Apr 16, 2022
• Online Publication Date: Apr 20, 2022
• Publication Date: 2022-06
• Deposit Date: Apr 20, 2022
• Publicly Available Date: Apr 21, 2024
• Print ISSN: 0927-5398
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 67
• Pages: 318-342
• DOI: https://doi.org/10.1016/j.jempfin.2022.04.004
• Keywords: Insider trading, Deterrence, Media coverage, Risk perception, Takeover targets
• Public URL: http://researchrepository.napier.ac.uk/Output/2865541