Informed trading around acquisitions: Evidence from corporate bonds

Simi Kedia, Xing Zhou

Research output: Contribution to journalArticlepeer-review

32 Scopus citations


This paper examines the prevalence of informed trading in corporate bonds prior to takeover announcements. We find significant pre-announcement trading activities and price movements in target bonds, in directions consistent with the nature of pending information. Improved transparency in the bond markets achieved by the implementation of the Trade Reporting and Compliance Engine (TRACE) system reduces the incidence of informed trading. Further, there is some weak evidence that dealers affiliated with merger and acquisition advisors sell in anticipation of negative news, pointing to a possible channel of information leakage. Such negative news seems to be incorporated into bond prices no slower than into the target stocks.

Original languageEnglish (US)
Pages (from-to)182-205
Number of pages24
JournalJournal of Financial Markets
Issue number1
StatePublished - Mar 2014

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


  • Corporate bond market
  • Informed trading
  • Merger and acquisition
  • Transparency


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