Leaks and Takeovers

When firms are takeover targets, they often experience a rise – or run-up – in the price of their stock even before the takeover is publicly announced. The common wisdom about run-ups is that information about the impending takeover is leaked to the market, which causes the stock price to increase. Some of these leaks are unintentional. Opportunistic outsiders overhear conversations or documents land in the wrong hands. Some leaks are driven by greed. Insiders trade on their privileged information to enrich themselves or pass their information on to friends and relatives. But what if information leaks have a strategic … Read more