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arbitrage, information theft and insider trading

Author

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  • Michael C. Jensen

Abstract

Risk arbitrage involves the purchase of a target firm's shares on the announcement of a merger or tender offer. These transactions provide a risky profit opportunity when the price of the target is below the risk-adjusted expected value of the final takeover price. This article explores the role of arbitragers in the merger and acquisition of firms, and how their role is important to the process and is not to be confused with insider-trading.

Suggested Citation

  • Michael C. Jensen, 2012. "arbitrage, information theft and insider trading," The New Palgrave Dictionary of Economics,, Palgrave Macmillan.
    • Handle: RePEc:pal:dofeco:v:6:year:2012:doi:3874
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    More about this item

    Keywords

    takeovers; mergers and acquisitions; Securities and Exchange Commission; arbitragers;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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