Private information leakages and informed trading returns of tech target firms

We measure private information leakages about target tech firms in mergers. We find that tech target firms with a higher level of asymmetric information are more exposed to mispricing, which allows for larger stock price gains from using expert networks or other means to obtain private information about impending mergers. We also find that the level of information leakages is reduced since the Sarbanes–Oxley Act and Galleon case. However, the reduction in the information leakage prior to tech merger announcements has been offset by the increased share price responses of tech firms to the merger announcements. Therefore, the potential rewards from using expert networks or other means to retrieve private information about tech target firms are still substantial for informed traders.