Informed Trading Reactions to New Private Information: Evidence from Nonpublic Merger Negotiations

• 成果类型: Article
• 署名作者: Heitzman, Shane; Klasa, Sandy
• 署名单位: University of Southern California; University of Arizona
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2020.3629
• 发表日期: 2021
• 页码: 2630-2656
• 关键词: speed of informed trading; number of informed investors; Mergers and Acquisitions

摘要

Theory provides competing predictions on whether informed investors immediately trade on newly generated private information. We address this question using Securities and Exchange Commission-mandated disclosures to identify the dates when new private information about target or acquiring firm value is created. We find that informed investors immediately trade on new private information in both the stock and options markets. Next, we investigate which factors drive the speed of these investors' trading reactions to newly generated private information. We show that cross-sectional variation in the speed of their trading reactions can be explained by the number of privately informed investors, institutional ownership, the expected profits from informed trading and associated risk of attracting the attention of enforcement agencies, and the existence of public information about the acquisition deal.