Bidder country characteristics and informed trading in U.S. targets

Information leakages experienced by U.S. targets in the pre-bid period are especially pronounced when they involve foreign bidders whose countries have weak insider trading sanctions, are perceived to have prevalent insider trading activity, have a low level of local merger activity, and are not classified as common law countries. Among foreign countries, information leakages are less pronounced when the bidder's government has a cooperative agreement with the SEC. Enforcement cooperation agreements signed between the SEC and foreign regulators serve as an effective means of enforcing the stricter U.S. insider trading laws on a more global scale.