Influencing Control: Jawboning in Risk Arbitrage

Influencing Control: Jawboning in Risk Arbitrage

  • TAO LI

Article first published online: 9th August 2018 DOI: 10.1111/jofi.12721


In an “activist risk arbitrage,” a shareholder attempts to improve terms of an announced M&A through public campaigns. Activists target deals with low premiums and those susceptible to managerial conflicts of interest, including going‐private deals and deals in which CEOs receive outsized payments. Activist arbitrageurs are associated with a significant decrease in the probability that targets will be sold to the announced bidders, and an increase in the premium paid, both ex post among surviving deals and ex ante among all deals. Activist arbitrage serves as a governance mechanism in M&A and earns higher returns than passive arbitrage.

Sign in to access the full article.

Are you an Author?

Please read our submission requirements and find out how to submit your paper to the Journal of Finance

Submit a paper