Abstract
We assess trading and non-trading characteristics of takeovers that trigger Securities and Exchange Commission (SEC) investigations of illegal insider trading. We find that targets with more pronounced abnormal stock price run-ups (especially in long pre-bid windows) and abnormal trading volume (especially in short pre-bid windows) trigger an SEC investigation. We also find that an SEC investigation is more likely when the takeover is characterized by a foreign bidder, a public bidder and a relatively large target. Thus, non-trading characteristics complement the trading characteristics in explaining what triggers an SEC investigation of insider trading.
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