Does insider trading explain price run-up ahead of takeover announcements?

type="main" xml:id="acfi12003-abs-0001" xml:lang="en"> <title type="main">Abstract</title> <p>This study empirically examines the impact of changes in substantial shareholdings ahead of 450 Australian takeover offers between the years 2000 and 2009. Previous studies have attributed a significant proportion of the price run-up effect in takeover targets to insider-trading behaviour. This study examines the contribution of a broad range of public information sources that are known to typically generate market anticipation, including the acquisition of toeholds ahead of takeover announcements. Our findings show no significant pre-bid run-up for takeover targets after considering these sources. We conclude from these results that previous findings attributing pre-bid share price run-up to illegal insider trading may overstate the existence of such conduct.