Insider Trading Legislation and Acquisition Announcements : Do Laws Matter?

In this paper we investigate how the enactment and enforcement of insider trading restrictions affect the way in which information about acquisitions is released before the actual acquisition announcement. 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 market in the runup phase before the announcement whereas the impact of subsequent enforcement actions by regulators is much weaker and insignificant in some tests. We conclude that market participants rationally anticipate law enforcement