Pre-Bid Run-Ups and Information Leakage in Sweden: An Empirical Analysis of Domestic and Cross-Border Acquisitions

Sammanfattning

Pre-bid run-ups are a debated issue in M&A, referring to increases in public target firms’ stock prices prior to takeover bids, raising concerns about insider trading. In this study, we examine pre-bid run-ups for Swedish target firms, focusing on differences between domestic and cross-border bids. Using an event study approach on 156 domestic and 136 cross-border target firms between 2004 to 2024, we analyze cumulative average abnormal returns through both a univariate and a multivariate analysis. Our findings do not provide adequate support for the existence of pre-bid run-ups at a general level in Sweden. More importantly, when breaking down the run-ups, we find that cross-border targets exhibit positive run-ups, which are significantly higher than those of domestic targets. We attribute these discrepancies to deal complexity and regulatory gaps, ultimately affecting corporate insiders and their opportunistic behavior. The differences are further amplified by early deviations, suggesting that market anticipation alone may not fully explain the abnormal price movements. Our study contributes to the literature by providing empirical evidence from a relatively unexplored market, highlighting the importance of market integrity.