University of Cambridge > > Finance & Accounting Seminar Series > Influencing Control : Jawboning in Risk Arbitrage

Influencing Control : Jawboning in Risk Arbitrage

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This is the first study on a relatively new phenomenon of “activist risk arbitrage,” in which some shareholders attempt to change the course of an announced M&A deal through public campaigns and appraisal appeals in order to profit from improved terms for either target or acquirer shareholders. Compared to conventional (passive) risk arbitrageurs, activist arbitrageurs are more likely to select deals that are susceptible to managerial conflicts of interest, including going-private deals, “friendly” deals, and deals with lower announcement premiums. While activist risk arbitrage does not significantly change the probability of deal completion, it increases the sensitivity of deal completion to market price signals. Finally, activist risk arbitrage yields significantly higher returns than passive arbitrage, with little incremental deal risk

This talk is part of the Finance & Accounting Seminar Series series.

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