This research seminar is hosted by the Centre for Research into Accounting and Finance in Context (CRAFiC) at Sheffield University Management School.
Jo Danbolt is Director of PG Programmes at the University of Edinburgh Business School, which he joined in 2012. He holds the Baillie Gifford Chair in Financial Markets. He is a qualified Siviløkonom (a Norwegian business qualification), and he holds a BA (Hons) in Business Organisation and a PhD in Finance, both from Heriot-Watt University, Edinburgh.
This study uses data between 1979 and 2014 and explores whether articles published in the Wall Street Journal referring to illegal insider trading in past mergers deter participants with inside information from dealing prior to forthcoming merger announcements. We find that the publication of these articles is negatively related with the next day’s abnormal target stock returns prior to merger announcements. Insiders seem to reduce their buy transactions of target firms, or even sell prior bought shares, on the day following the publication of relevant articles, for fear of getting caught. Our relation is more pronounced for small rather than large capitalization target firms, with long rather than short articles, and during bear rather than bull periods. Overall, these results emphasize the role of the media as a prevention mechanism of illegal transactions.