Does target firm insider trading signal the target's synergy potential in mergers and acquisitions?

2021 ◽  
Author(s):  
Inho Suk ◽  
Mengmeng Wang
Keyword(s):  
Mergers And Acquisitions ◽  
Insider Trading ◽  
Target Firm

The SEC’s Impact on the Federalization of Corporate Governance—A Traditional Perspective

2018 ◽  
Author(s):  
Marc I. Steinberg
Keyword(s):  
Corporate Governance ◽  
Mergers And Acquisitions ◽  
Insider Trading ◽  
Securities And Exchange Commission ◽  
Outside Directors ◽  
Tender Offers ◽  
Going Private ◽  
Rule Making

This chapter examines, from a traditional perspective, several areas where the Securities and Exchange Commission (SEC) has impacted corporate governance in a meaningful way. By way of example, these subjects include insider trading, qualitative materiality, the role of gatekeepers (such as outside directors, attorneys, and accountants), the Commission’s use of disclosure to influence conduct, the implementation by subject companies of undertakings pursuant to SEC enforcement proceedings, and mergers and acquisitions (including tender offers and going-private transactions). This chapter’s focus is on the manner in which the SEC for well over 50 years has impacted corporate governance by means of exercising its rule-making and oversight authority.

The role of toeholds on asymmetric information in mergers and acquisitions

2017 ◽  
Vol 34 (2) ◽  
pp. 260-280
Author(s):  
Sebouh Aintablian ◽  
Wissam El Khoury ◽  
Zouhaier M’Chirgui
Keyword(s):  
Asymmetric Information ◽  
Mergers And Acquisitions ◽  
Intangible Assets ◽  
Negative Relationship ◽  
Multinomial Logit Model ◽  
Target Firm ◽  
Content Type ◽  
Tender Offers ◽  
Asymmetry Of Information

Purpose This paper aims to examine empirically the role of toeholds in reducing asymmetric information in mergers and acquisitions by establishing a relationship between the toehold and some relevant characteristics of the acquiring and the target firm. Design/methodology/approach A regression analysis is conducted to examine the relation between the dependent variable (the toehold) and a set of independent variables. A multinomial logit model is used to test for the occurrence of toeholds. A probit selection model and two-step Heckman correction tests are used to correct the data and to check for robustness of the results. Findings The regression results for acquisitions with prior toeholds are consistent with the studied hypotheses that asymmetric information is more observed in foreign acquisitions, in different industries, with tender offers and with higher levels of intangible assets. A negative relationship is found between toehold size and the number of competing bidders. Originality/value Consistent with previous literature, the study finds that majority of bidders abstain from purchasing a toehold before entering a bid contest. The study also emphasizes the role of intangible assets in assessing the efficacy of toeholds under asymmetric information. The ratio of target intangible assets to target total serves as a proxy for asymmetric information. Regression results are consistent with the hypotheses that asymmetry of information is observed when the acquiring and the target firm operate in different countries and industries.

scholarly journals The Urge to Merge: The Role of Governance Structures in Mergers and Acquisitions

1970 ◽  
Vol 13 (2) ◽  
pp. 151-166
Author(s):  
Catherine Daily ◽  
Dan Dalton
Keyword(s):  
Decision Making ◽  
Mergers And Acquisitions ◽  
Board Of Directors ◽  
Board Composition ◽  
Outside Directors ◽  
Target Firm ◽  
Target Firms ◽  
The Board Of Directors ◽  
The Relationship

The 1990s have witnessed merger and acquisition activity which rivals that of the 1980s "merger mania." As firms continue to consolidate either within industries or across industries it is appropriate to investigate those aspects of a target firm which might attract a bidder. The board of directors, a central decision-making body in the corporation, may provide insights into this process. This study investigates the relationship between board composition and size and the incidence of a firm being targeted for a merger or acquisition. Results of a logistic regression analysis of a matched set of target firms and firms not targeted for merger or acquisition reveal that target firms have higher proportions of independent outside directors and more total numbers of directors. Moreover, we find that target firms have greater exposure to institutional investors.

scholarly journals Do target firms always gain? The determinants of target firms loss in US takeovers

2012 ◽  
Vol 10 (1) ◽  
pp. 254-270
Author(s):  
Ahmad Ismail
Keyword(s):  
Mergers And Acquisitions ◽  
Relative Size ◽  
Excess Risk ◽  
Share Price ◽  
Considerable Proportion ◽  
Target Firm ◽  
Target Firms ◽  
Logistic Regressions ◽  
Target Leverage ◽  
Negative Target

Studies that examine the profitability of mergers and acquisitions document that a considerable proportion (15-20%) of target firms earn negative returns. This study examines why the share price of the target firm reacts negatively to the announcement of some merger deals, while it reacts positively to others. We find that target firms that earn negative returns are less efficient, less profitable, receive a lower premium, are more likely to be paid with stocks, and attract less efficient acquirers than target firms that earn positive returns. The logistic regressions indicate that high relative size, low premium, higher target leverage, equity exchange offers, and mixed payment deals are associated with a higher likelihood of loss for the target firm. Fewer anti-takeover provisions for target firms are associated with a higher probability of loss, because such target firms, if necessary, are more likely to be disciplined by the market and be paid a low premium. Meanwhile, a high G-Index on the part of the acquirer is associated with negative target returns in share exchange offers if the premiums paid do not compensate for the acquirer excess risk.

scholarly journals Acquisitions of Financially Constrained Targets

2019 ◽  
pp. 1-10
Author(s):  
Maslinawati Mohamad ◽  
Surendranath Rakesh Jory ◽  
Nnamdi Madichie
Keyword(s):  
United States ◽  
Mergers And Acquisitions ◽  
Stock Returns ◽  
Abnormal Returns ◽  
The United States ◽  
Target Firm ◽  
Wealth Transfer ◽  
Stock Market Reaction ◽  
Cumulative Abnormal Returns ◽  
Acquisition Announcements

We examine the extent to which bidders’ stock returns at acquisition announcements reflect the financing needs of the target firm. Using a sample of the United States mergers and acquisitions of a period starts in 1985 and ends in 2012, we find that bidders of financially constrained targets pay lower acquisition premiums and earn higher announcement period cumulative abnormal returns than bidders of unconstrained targets. The lower premium and positive stock market reaction are both sources of value for bidders’ shareholders. Our results contrast the findings of the literature that document an insignificant wealth transfer to bidder shareholders.

The informativeness of short sellers: an insider’s perspective

2018 ◽  
Vol 8 (4) ◽  
pp. 354-386 ◽  
Author(s):  
George Gao ◽  
Qingzhong Ma ◽  
David Ng
Keyword(s):  
Information Extraction ◽  
Insider Trading ◽  
Private Information ◽  
Stock Prices ◽  
Target Firm ◽  
Content Type ◽  
Short Sellers ◽  
Short Sale ◽  
Corporate Insiders ◽  
Extract Information

Purpose The purpose of this paper is to empirically examine whether corporate insiders extract information from activity of outsiders, specifically the short sellers. Design/methodology/approach Using portfolio approach and Fama-MacBeth regressions, this study examines the relation between short interest and subsequent insider trading activities. Findings The following results are reported. First, there is a strong inverse relation between short selling and subsequent insider trading, which is partially due to common private information and same target firm characteristics. Second, insiders extract information from shorts. This information extraction effect is more pronounced for firms whose insiders have stronger incentives to extract shorts information (insider purchases, higher short sale constraints, and better information environments). Third, during the September 2008 shorting ban, the information extraction affect disappeared among the large banned firms, whose shorting activities were distorted. Research limitations/implications The findings contradict the of-cited accusations corporate executives hold against short sellers. Instead, corporate insiders appear to trade in the same direction as suggested by shorting activities. Practical implications Among the vocal critics of short sellers are corporate insiders, who allege that short sellers beat down their stock prices. Many corporations even engage in stock repurchases to show confidence that the stock will perform well going forward despite the short sellers’ actions. This paper’s analysis on their personal portfolios suggests the other way around. Originality/value By focusing on how corporate insider trading is related to shorts information, this paper sheds new light on whether corporate decisions convey the true information the corporate insiders possess.

Autophagy

2016 ◽  
Author(s):  
Michael Kinch
Keyword(s):  
New York ◽  
Erectile Dysfunction ◽  
Pharmaceutical Industry ◽  
Mergers And Acquisitions ◽  
Insider Trading ◽  
High Profile ◽  
The Past ◽  
Innovative Company ◽  
Martha Stewart ◽  
A Company

The title of the chapter is a Greek term that literally translates into “eating oneself” and is representative of a trend of mergers and acquisitions that has subsumed the drug development enterprise over the past three decades and now fundamentally threatens our ability to develop new medicines. We begin with two examples of acquisitions by Eli Lilly & Company. One product resulted from an unexpected discovery by Pfizer scientists of a drug meant to treat angina that had the unexpected but not undesired effect of treating erectile dysfunction. The second acquisition, of New York-based Imclone, was the final step in a high profile controversy that led the jailing of its CEO and the celebrity Martha Stewart for insider trading. Despite these two acquisitions, Eli Lilly largely did not participate in the merger mania of the past few decades and we relate how this most innovative company fell through the rankings to become a middling contender. This waning resulted from the meteoric rise of Pfizer as one of the most aggressive purveyors of pharmaceutical industry consolidation and the unlikely rise of Valeant Pharmaceuticals, a company with a checkered history and ongoing woes.

Summary of Recommendations for Adoption

2021 ◽  
pp. 301-322
Author(s):  
Marc I. Steinberg
Keyword(s):  
Corporate Governance ◽  
Mergers And Acquisitions ◽  
Insider Trading ◽  
Securities And Exchange Commission ◽  
Business Practices ◽  
Due Diligence ◽  
Securities Litigation ◽  
Legitimate Business ◽  
Adoption And Implementation ◽  
The U.S

This chapter summarizes key recommendations that are proffered throughout this book. Recommendations that are proposed encompass the areas of the disclosure framework, issuer exemptions from Securities Act registration, exemptions for resales of securities, the Securities Act registration framework, due diligence in registered offerings, the federalization of corporate governance, private securities litigation, insider trading, mergers and acquisitions, and the Securities and Exchange Commission. In total, well over 100 recommendations are set forth in this chapter. Hence, this book has identified problematic areas, analyzed their shortcomings, and recommended solutions that should ameliorate the deficiencies that exist. With the adoption and implementation of the recommendations made herein, the U.S. securities framework should become more transparent, even-handed, and investor-oriented without imposing undue burdens on legitimate business practices.

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