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Discussed by Keng-Yu Ho National Taiwan University December 11-12, 2008

Profitability and Characteristics of Risk Arbitrage: Evidences from Leveraged Buyouts in the U.S. Sue Fung Wang, Kehluh Wang, Chiu Nan Tsai National Chiao Tung University. Discussed by Keng-Yu Ho National Taiwan University December 11-12, 2008 NTU International Conference on Finance.

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Discussed by Keng-Yu Ho National Taiwan University December 11-12, 2008

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  1. Profitability and Characteristics of Risk Arbitrage: Evidences from Leveraged Buyouts in the U.S.Sue Fung Wang, Kehluh Wang, Chiu Nan TsaiNational Chiao Tung University Discussed by Keng-Yu Ho National Taiwan University December 11-12, 2008 NTU International Conference on Finance

  2. Summary of the Paper • The determinants of risk arbitrage profit, specifically spread returns. • U.S. LBOs from 1991-2006, with 234 successful deals and 65 failed deals. • Annual average risk arbitrage return of 20%. • Spread return is positively related to offer duration and bid premium but negatively related to price revision. • Reversal of target firm price is positively related to P/B ratio. 2008 NTU International Conference on Finance

  3. Review Comments • What makes LBOs special? • Private transaction. • Cash offer. • Less hostile. • Higher rate of success. • Compare LBO results to general M&A results. • Motivation could be more focused. • The definition of revision return… • Based on the example, would it be plus or minus 10%? 2008 NTU International Conference on Finance

  4. Review Comments • More control variables in the model. • Sub-sample analysis. • Before and after 2000. • Further extension… • Corporate governance. 2008 NTU International Conference on Finance

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