Risk Arbitrage in Takeovers

  title={Risk Arbitrage in Takeovers},
  author={Francesca Cornelli},
  • Francesca Cornelli
  • Published 1998
The paper studies the role of risk arbitrage in takeover contests. We show that arbitrageurs have an incentive to accumulate non-trivial stakes in a company which is the target of a takeover. For each arbitrageur, the knowledge of his own presence (and that he will tender a positive fraction of his shares) is an informational advantage which guarantees that there is a scope for trade with the other shareholders. In equilibrium, the number of arbitrageurs buying shares and the number of shares… CONTINUE READING
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