We study both theoretically and empirically option prices on firms undergoing a cash merger offer. To estimate the … merger's success probability, we use a Markov Chain Monte Carlo (MCMC) method using a state space representation of our model …. Our estimated probability measure has significant predictive power for the merger outcome even after controlling for …

-level uncertainty is characterized by a pecking order: the announcement of a domestic takeover leads to a reduction in the uncertainty …

identify the effect of business risk on capital structure. We find that post-merger changes in leverage and cash holdings are … strongly predicted by expected asset volatility changes estimated using pre-merger information. These capital structure …, consistent with the trade-off theory of capital structure. Our coefficient estimates imply that a one standard deviation decline …

We examine the interaction between funds implementing hedge and merger arbitrage strategies and a set of traditional …