This paper evaluates investment strategies that exploit the deviations from theoretical price parity in a sample of 12 dual-listed companies (DLCs) in the period 1980–2002. We show that simple trading rules produce abnormal returns of up to almost 10% per annum adjusted for systematic risk, transaction costs, and margin requirements. However, arbitrageurs face uncertainty about the horizon at which prices will converge and deviations from parity are very volatile. As a result, DLC arbitrage is characterized by substantial idiosyncratic return volatility and a high incidence of large negative returns, which are likely to impede arbitrage.

Companies can increase executive compensation by allowing dividends to be paid on unvested restricted stocks grants, also known as stealth compensation. Examining all S&P 500 firms over the period 2003–2007, we find that more than half of the dividend paying firms allow this practice. We look at whether this form of compensation reduces agency costs or decreases value for shareholders. We find that CEOs' stealth compensation amounts to an average of $180,000 in additional income, which increases the CEOs' cash compensation and total compensation by 9% and 2% respectively. Firms engaging in stealth compensation have higher dividend payout ratios than those not allowing stealth compensation. For all firms using stealth compensation, there is a reduction in average ROA and Tobin's Q over the long run. However, stealth compensation companies with potential agency issues see a meaningful improvement in their long run performance. For weakly governed companies, stealth compensation may act as a bonding mechanism which may serve to reduce agency costs and therefore increase shareholder value.

We examine 121 reverse takeovers (RT), in which a privately held firm acquires a publicly traded firm to obtain their exchange listing. The public firms, many of which went public during the initial public offering (IPO) bubble, are generally poor performers. Their shareholders receive significant wealth gains upon announcement, suggesting that these events may provide shareholders of distressed firms a way to recover some of their investment. We observe little post-event improvement in operations or profitability, and only 46% of the sample survives two years. Thus, while reverse takeovers provide alternative means of going public, they are risky and may fail to generate long-term wealth.

This paper examines movements in the prices of target stocks as predictors of the ultimate success or failure of tender offers. An empirical investigation of 100% cash tender offers during the years 1976 to 1981 leads to the conclusion that, with few exceptions, market prices are well‐calibrated, i.e., the current target price during the offer period measures the expected (discounted) stock price at the conclusion date. The market's probability predictions improve monotonically over time.

This paper hypothesizes and tests the argument that a defeasance transaction initiates a wealth transfer from stockholders to bondholders. Our empirical tests provide compelling evidence of bondholder gains, but no support for shareholder losses when a firm defeases debt. We speculate that the insignificance of the loss to shareholders is primarily due to the size disparity between the value of defeased debt and the market value of outstanding equity, since the suggested economic merits of defeasance appear unfounded. Although we cannot prove an agency motivation for defeasance, we find a very high correlation between compensation tied to earnings and defeasing debt at a book gain.

This paper hypothesizes and tests the argument that a defeasance transaction initiates a wealth transfer from stockholders to bondholders. Our empirical tests provide compelling evidence of bondholder gains, but no support for shareholder losses when a firm defeases debt. We speculate that the insignificance of the loss to shareholders is primarily due to the size disparity between the value of defeased debt and the market value of outstanding equity, since the suggested economic merits of defeasance appear unfounded. Although we cannot prove an agency motivation for defeasance, we find a very high correlation between compensation tied to earnings and defeasing debt at a book gain.