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Do business ties generate private information? Evidence from institutional trading around M&A announcements

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  • Pedersen, David J.

Abstract

Business ties generate private information for institutional investors related to a firm's 401(k) trustee. These investors strategically trade a bidder's stock around the announcement of a deal, reducing holdings ahead of value-destroying deals and increasing their positions before value-creating ones. Superior trading ability does not explain this behavior as these same investors do not exhibit similar trading behavior in firms with which they do not have a business tie.

Suggested Citation

  • Pedersen, David J., 2021. "Do business ties generate private information? Evidence from institutional trading around M&A announcements," Finance Research Letters, Elsevier, vol. 38(C).
    • Handle: RePEc:eee:finlet:v:38:y:2021:i:c:s1544612319307573
    DOI: 10.1016/j.frl.2020.101462
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    References listed on IDEAS

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    More about this item

    Keywords

    Business ties; Mergers and acquisitions; 401(k); Employee pension plans; Trustee;
    All these keywords.

    JEL classification:

    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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