"In the paper, 'The Dark Role of Investment Banks in the Market for Corporate Control,' three European finance professors examined more than 1,600 U.S. merger deals between 1984 and 2003, along with quarterly 13F filings of institutional stock ownership. They found that during the last quarter before a merger announcement, large investment banks serving as lead advisers to acquirers accumulated shares in target companies just over 19% of the time -- either by taking new stakes or significantly increasing existing stakes. That's nearly double the 10.5% rate of investment banks not serving in that role....The paper -- by Mr. Simonov, Massimo Massa of French business school Insead, and Andriy Bodnaruk of Maastricht University in the Netherlands -- was presented earlier this month at an American Finance Association conference, but hasn't yet been published. Its underlying implication is that suspect trading could be occurring in the early stages of deal talks, long before it is likely to raise red flags."
I hope no one is too surprised by this finding.