We develop a dynamic multi-equation model where firms make financing and investment decisions jointly subject to the constraint that sources must equal uses of cash. We argue that static models of financial decisions produce inconsistent coefficient estimates and that models that do not...

This paper uses a sample of 4,750 stock swap mergers, cash mergers, and cash tender offers during 1963 - 1998 to characterize the risk and return in risk arbitrage. For out-of-sample comparison, we also examine the risk/return profile for a sample of active risk arbitrage hedge funds during 1990...

We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While...

We study three cases in which specialized arbitrageurs lost significant amounts of capital and, as a result, became liquidity demanders rather than providers. The effects on security markets were large and persistent: Prices dropped relative to fundamentals and the rebound took months. While...

This paper examines the impediments to arbitrage in 82 situations between 1985 and 2000, where the market value of a company is less than the sum of its publicly traded parts. These situations suggest clear arbitrage opportunities and provide an ideal setting in which to study the risks and...

This paper examines the trading behavior of professional investors around 2,130 mergers announced between 1994 and 2000. We find considerable support for the existence of price pressure around mergers caused by uniformed shifts in excess demand, but that these effects are fairly short-lived,...

This paper uses commercial aircraft transactions to assess the degree to which bankruptcy court protection alleviates costs of financial distress associated with asset sales. Results indicate that bankruptcy court protection does little to mitigate price discounts associated with distressed...

Empirical studies of firms' financing, investment, and payout policies routinely examine these policies in isolation. In this paper we develop a dynamic multi-equation model where firms make financing and investment decisions jointly subject to the constraint that sources of cash must equal uses...

The imminent failure of large Wall Street prime brokerage firms during the 2008 financial crisis caused a sudden and dramatic decrease in the amount of financial leverage afforded hedge funds. This decrease in financing resulted from the ex post asymmetrical payoff to rehypothecation lenders –...