Investment risk
Investment risk

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

Investment risk

3.6 Event risk

This is not unlike default risk but it is a special case meriting its own category. The shareholders or management of a company might consciously and voluntarily enter into a major transaction that radically changes either the company's nature or its capital structure (that is, the balance and mix of shares and various types of debt in its overall sources of finance). Such a restructuring might cause some or all investors to suffer a significant increase in the uncertainty of their investment returns. One common example of such an event is a management buyout (MBO), which frequently results in the replacement of a portion of the equity capital with debt and causes a corresponding increase in the financial risks to investors. In practice, more sophisticated investors seek to protect themselves in advance against event risk by incorporating suitable covenants into their original contracts with the company.


Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to university level study, find out more about the types of qualifications we offer, including our entry level Access courses and Certificates.

Not ready for University study then browse over 900 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus