RT Generic
T1 Deregularization, insider trading and tender offers
A1 Camino Blasco, David
A1 López Gómez, Miguel Ángel
AB This paper examines insider trading operations and the transmission of information tomarkets, during the merger and firm acquisition process, that followed the deregulation andrestructuring of the Spanish electrical sector, who began in 1993 and is still under way inmany countries of the European Union (Green Paper, 2001). In particular, we will study theevents surrounding the 1996 acquisition of FECSA and Sevillana de Electricidad, two ofthe Spanish biggest electricity suppliers and distributors, by ENDESA, a formerly stateowned company and the nation’s largest power supplierWe use public trading records around the announcement date of the event to track abnormalreturns, market volumes and spreads and to isolate individual transaction records by broker,from the flow of background trading, permitting the analysis of the market ’s reaction to theonset of informed trading. Because the insider information was not revealed to other marketparticipants until the event, and even rumors of the acquisition were publicly and officiallydenied, this case presents a unique laboratory for studying the dissemination andincorporation of private inside information into market prices.Unlike earlier studies that make use of daily transactions and concentrates on how informedtrading affects stock prices, this paper also analyzes individual insider purchases within thetrading day. We examine excess returns on the days of illegal insider trading and how thistrading is conducted in terms of average trade volume, frequency of transactions, averagespread and brokerage firm.The findings reported in the paper shed some light in the process by which the marketincorporates and infers information from insider trading in a case of industry restructuring.The relationship between insiders’ purchases can be documented on a day-by-day basis, bytrade, firm and broker, but we can’t go beyond that information (i.e., naming the insiders)except in the few cases where a preliminary penalty file was opened and concluded, by theCNMV. Nevertheless, our results have a number of implications for models of marketmicrostructure, as the reaction of prices to insider operations prior to the announcementday, the way insiders operate on average, with large and frequent limit and market ordersand quick sales after the run-ups.
PB SSRN
YR 2002
FD 2002-06
LK https://hdl.handle.net/10016/14163
UL https://hdl.handle.net/10016/14163
LA eng
DS e-Archivo
RD 27 jul. 2024