Insider Trading Legislation and Acquisition Announcements: Do Laws Matter?
In this paper we investigate how the enactment and enforcement of insider trading restrictionsaffect the way in which information about acquisitions is released before the actual acquisitionannouncement. We analyze a sample with almost 19,000 acquisition announcements from 48 countries. We find that insider trading legislation strongly affects the information revealed to the marketin the runup phase before the announcement whereas the impact of subsequent enforcement actions by regulators is much weaker and mostly insignificant. The impact of insider trading legislation isstronger in countries with more effective judicial systems. We conclude that market participantsrationally anticipate the degree of law enforcement.