The effects of the risk arbitrage process on the trading in securities involved in takeovers

TL;DRAbstract

This dissertation consists of an in-depth study of the risk arbitrage process and its effects on the trading of the securities involved in takeover attempts. The first chapter entitled, "Examination of the Effects of Arbitrage Activity on Terminated Takeover Transactions" is a detailed analysis of the performance of target companies' security prices after a merger, tender offer or bear hug transaction is cancelled. In this chapter we examine whether investors can obtain abnormal returns from investing in situations where the arbitrage community unwinds their positions after an acquisition announcement is terminated. In the second chapter, "Return Distribution Changes in Securities Involved with Mergers and Takeovers", we examine the changes that occur in the distribution of security returns and betas when risk arbitrage transactions are announced. Secondly, we show that the distributions of returns from arbitrage opportunities are not normally distributed. We also examine arbitrage ret

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