DOES SECTION 16B DETER INSIDER TRADING BY TARGET MANAGERS

• 成果类型: Article
• 署名作者: AGRAWAL, A; JAFFE, JF
• 署名单位: University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/0304-405X(95)00833-Z
• 发表日期: 1995
• 页码: 295-319
• 关键词: mergers; Insider trading; SHORT-SWING RULE; SECTION 16B; SEC

摘要

This paper examines empirically whether the short-swing rule (Section 16b of the Securities Exchange Act) deters managers from trading before mergers. Since a merger forces the sale of the target's outstanding equity, insider purchases within six months before the merger cannot escape this rule. We examine the 1941-61 period when no other insider trading laws were enforced. Consistent with 16b's deterrent effect, managers' purchases drop significantly before the announcement. Before completion, the decrease occurs only in the 1941-55 period. Surprisingly, pre-announcement sales do not decline, even though 16b cannot punish deferral of planned sales.