The probability of informed trading and mergers and acquisitions

Bugeja, M; Lu, M; Shan, Y; To, T

The probability of informed trading and mergers and acquisitions

Bugeja, M

Lu, M

Shan, Y

To, T

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Publication Type:: Journal Article
Citation:: Accounting and Finance, 2019
Issue Date:: 2019-01-01

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Field	Value	Language
dc.contributor.author	Bugeja, M https://orcid.org/0000-0002-1941-5092	en_US
dc.contributor.author	Lu, M https://orcid.org/0000-0003-1798-5195	en_US
dc.contributor.author	Shan, Y https://orcid.org/0000-0003-2156-8722	en_US
dc.contributor.author	To, T	en_US
dc.date.available	2020-11-06T18:07:47Z
dc.date.issued	2019-01-01	en_US
dc.identifier.citation	Accounting and Finance, 2019	en_US
dc.identifier.issn	0810-5391	en_US
dc.identifier.uri	http://hdl.handle.net/10453/136772
dc.description.abstract	© 2019 Accounting and Finance Association of Australia and New Zealand This paper investigates the role of the probability of informed trading (PIN) in mergers and acquisitions (M&A). We show that acquirers with higher PINs use more cash to finance their deals due to their higher cost of equity, and acquirers use more equity financing when acquiring targets with higher PINs to share the information risk with the target shareholders. We also find that acquirers and targets with higher PINs both experience higher announcement returns when cash financing is used, indicating that PINs are priced in the M&A market.	en_US
dc.relation.ispartof	Accounting and Finance	en_US
dc.relation.isbasedon	10.1111/acfi.12562	en_US
dc.rights	info:eu-repo/semantics/openAccess
dc.subject.classification	Accounting	en_US
dc.title	The probability of informed trading and mergers and acquisitions	en_US
dc.type	Journal Article
utslib.for	1402 Applied Economics	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	open_access	*
pubs.publication-status	Published	en_US

Abstract:

© 2019 Accounting and Finance Association of Australia and New Zealand This paper investigates the role of the probability of informed trading (PIN) in mergers and acquisitions (M&A). We show that acquirers with higher PINs use more cash to finance their deals due to their higher cost of equity, and acquirers use more equity financing when acquiring targets with higher PINs to share the information risk with the target shareholders. We also find that acquirers and targets with higher PINs both experience higher announcement returns when cash financing is used, indicating that PINs are priced in the M&A market.

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http://hdl.handle.net/10453/136772