A Run-Down of Merger Target Run-Ups

We show that run-ups in U.S. target firm stock returns preceding merger announcements have declined drastically over recent decades. The negative trend in target run-ups cannot be fully explained by changes in deal or target characteristics associated with merger anticipation. However, it disappears after controlling for changes in the strength of U.S. insider trading regulation over the research period. Our results, which survive robustness and placebo tests, suggest that U.S. insider trading rules are effective at curbing pre-announcement trading