The first paper of this dissertation examines whether managers engage in opportunistic insider trading by measuring how their net open market purchases and holdings of own company stock change around acquisitions, seasoned equity offerings and share repurchases after controlling for their share and option holdings and non-informational motives for trading. On average, managers abnormally increase sales and reduce holdings around stock acquisitions and seasoned equity offerings but not around cash acquisitions and share repurchases. However the typical manager does not experience an economically significant change in ownership; more material ownership changes are limited to the subsets of the sample. These results suggest that the evidence for managerial opportunism is modest in magnitude and not pervasive in the sample.

The second paper of this dissertation explores the link between stock market overvaluation and merger activity. I examine how managers recently traded in own company stock in their personal portfolios to infer whether they view their firm as overvalued or undervalued. I find that firms whose managers sold more recently are more likely to acquire other firms for stock and the subsequent mergers have negative and lower short-run and long-run abnormal returns. However using measures which express trading as a percentage of share and option holdings and as changes in ownership, these results weaken considerably. Hence my findings show that the predictions of market misvaluation theory are weakly supported at best, if supported at all, by the data at hand.