M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Monday, February 8, 2010

Canadian Insider Trading

Oh no!  Say it ain't so!  Even the Canadians are inside traders?!  I'm beginning to lose all faith in humanity...
Update:  Acquisition announcements generate predictable movements in acquirer stock. For example, post-announcement returns are typically negative for high Tobin’s q acquirers, stock transactions, and foreign targets, but positive for venture capital-backed private targets. Pre-announcement trading of acquirer stock is more likely to be attributable to insider trading when the pre-announcement price changes match the expected post-announcement acquirer returns. Based on a sample of Canadian acquirers and public and private acquisition targets from Canada, the U.S. and 31 other countries over the years 1991-2008, we find evidence consistent with insider trading of acquirer stock. This evidence, however, is limited to specific situations and is far from generalizable to all types of acquisition announcements. The evidence thereby has policy implications for the allocation of surveillance efforts for initiating insider trading investigations.



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