Costly Communication , Shareholder Activism , and Limits to Arbitrage

  title={Costly Communication , Shareholder Activism , and Limits to Arbitrage},
  author={Michael Bradley and Alon Brav and Itay Goldstein and Wei Jiang},
Using a unique hand-collected dataset, we show that shareholder activism aimed at open ending U.S. based closed-end funds has become frequent since 1992. We denote this phenomenon as activist arbitrage and distinguish it from the standard pure trading arbitrage. We document a dual relationship between activist arbitrage and funds’ discounts: a high discount increases the probability of an activist attack, while a high probability of ex post attack reduces the ex ante discount. We provide… CONTINUE READING

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