It is often stated that bidders acquire poorly-run targets in order to improve firm performance. This inefficient management hypothesis is frequently tested by examining target stock returns in the years prior to an acquisition. While the hypothesis is commonly assumed in the literature to be...

This paper empirically examines whether the short swing rule (Section 16b of the Securities Exchange Act) deters managers from trading before merger announcements. This rule bars insiders from profiting on round-trip trades within a six month period. It is unlikely to deter insiders from trading...