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The Informativeness Of Substantial Shareholder Trading In The Lead Up To A Takeover Bid, Millicent M. Chang, Raymond Da Silva Rosa, Wilson Ng

Faculty of Business - Papers (Archive)

Although substantial shareholders are often considered quasi-insiders, not much is known about the information they possess, especially around changes in corporate control events. We examine whether substantial shareholders in target firms possess information about future takeover activity and if they have such information, whether they trade opportunistically on it. The results show increased purchases by substantial shareholders close to a takeover announcement where these trades predict the likelihood of takeovers. However, they do not predict bid premiums nor other deal characteristics. A comparison of different types of substantial shareholders indicates that institutional shareholder trades are better indicators of takeover likelihood …