Price run-ups and insider trading laws under different regulatory environments

Panetsidou, S., Synapis, A. and Tsalavoutas, Y. (2022) Price run-ups and insider trading laws under different regulatory environments. Review of Quantitative Finance and Accounting, 59(2), pp. 601-639. (doi: 10.1007/s11156-022-01052-0)

Abstract

We examine target firms’ price run-ups prior to takeovers in two different exchange regulatory environments within the same country. We show that target firms listed both in the secondary market of the UK, known as the Alternative Investment Market (AIM), and in the traditionally regulated Main Market, experience significant abnormal stock returns prior to takeover announcements. These results persist after controlling for market anticipation, indicating signs of information leakage. Contrary to the narrative that secondary markets may be more susceptible to market abusive behaviors, we find that the AIM targets experience significantly lower pre-announcement returns. In addition, we do not find support that the introduction of stricter laws reduces the price run-ups in any of the two markets. In sharp contrast, we find support that the enforcement of insider trading laws, through criminal convictions, reduces the pre-announcement abnormal stock returns but only in the market in which the enforcement focuses.

• Item Type: Articles
• Status: Published
• Refereed: Yes
• Glasgow Author(s) Enlighten ID: Synapis, Mr Angelos and Tsalavoutas, Professor Yannis
• Authors: Panetsidou, S., Synapis, A., and Tsalavoutas, Y.
• College/School: College of Social Sciences > Adam Smith Business School; College of Social Sciences > Adam Smith Business School > Accounting and Finance
• Journal Name: Review of Quantitative Finance and Accounting
• Publisher: Springer
• ISSN: 0924-865X
• ISSN (Online): 1573-7179
• Published Online: 15 April 2022
• Copyright Holders: Copyright © 2022 The Authors
• First Published: First published in Review of Quantitative Finance and Accounting 59(2): 601-639
• Publisher Policy: Reproduced in accordance with the copyright policy of the publisher