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Are investors compensated for their sophistication and informedness for company takeovers – An Australian study

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  • McAdam, Chris

Abstract

I determine the sophistication and information level in takeovers for four investor classes which are individuals, nominees (fund managers), superannuation (pension) funds and incorporated companies. I also calculate their takeover returns. I find that the superannuation funds are informed and sophisticated; individuals are informed but unsophisticated; nominees are uninformed but sophisticated; and incorporated companies are uninformed and unsophisticated traders, and that the investors realise a return which is commensurate with their information and sophistication. This study improves on existing takeover return research which assumes, as a group, institutions are synonymously informed and sophisticated, and individuals are synonymously unsophisticated and uninformed.

Suggested Citation

  • McAdam, Chris, 2020. "Are investors compensated for their sophistication and informedness for company takeovers – An Australian study," Global Finance Journal, Elsevier, vol. 44(C).
    • Handle: RePEc:eee:glofin:v:44:y:2020:i:c:s1044028317301370
    DOI: 10.1016/j.gfj.2018.08.002
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    More about this item

    Keywords

    Trading behaviour; Individual investors; Takeover returns; Informed traders;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • G02 - Financial Economics - - General - - - Behavioral Finance: Underlying Principles
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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