A Comparative Analysis of Hostile Takeover Regimes in the US, UK and Japan (with Implications for Emerging Markets)

88 Pages Posted: 13 Aug 2010

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Jack B. Jacobs

Government of the State of Delaware - Court of Chancery

Curtis J. Milhaupt

Stanford Law School

Date Written: August 12, 2010


In each of the three largest economies with dispersed ownership of public companies - the United States, the United Kingdom, and Japan - hostile takeovers emerged under a common set of circumstances. Yet the national regulatory responses to these new market developments diverged substantially. In the United States, the Delaware judiciary became the principal source and enforcer of rules on hostile takeovers. These rules give substantial discretion to target company boards in responding to unsolicited bids. In the UK, by contrast, a private body consisting of market professionals was formed to adopt and enforce the rules on hostile bids and defenses. In contrast to those of the US, the UK rules give the shareholders primary decision making authority in responding to hostile takeover attempts. The hostile takeover regime in Japan, which developed recently and is still evolving, combines substantive rules with elements drawn from both the US (Delaware) and the UK, while adding distinctive elements, including an independent enforcement role for Japan’s stock exchange.

This Article provides an analytical framework for business law development to explain the diversity in hostile takeover regimes in these three countries. The framework focuses on the universal supply and demand dynamics that drive the evolution of business law in response to new market developments. It emphasizes the common role of subordinate lawmakers in filling the vacuum left by legislative inaction, and it highlights the prevalence of “preemptive lawmaking” to avoid legislation that may be contrary to the interests of important corporate governance players.

Extrapolating from the analysis of developed economies, the framework also illuminates the current state and future trajectory of hostile takeover regulation in the important emerging markets of China, India, and Brazil, where corporate ownership structures may be changing. An important pattern revealed by the analysis is the ostensible adoption - and adaptation - of “best practices” for hostile takeover regulation derived from Delaware and the UK in ways that protect important interests within each emerging market’s national corporate governance system.

Keywords: Hostile Takeovers, Corporate Law, Corporate Governance

JEL Classification: G34, K22

Suggested Citation

Armour, John and Jacobs, Jack B. and Milhaupt, Curtis J., A Comparative Analysis of Hostile Takeover Regimes in the US, UK and Japan (with Implications for Emerging Markets) (August 12, 2010). Columbia Law and Economics Working Paper No. 377. Available at SSRN: https://ssrn.com/abstract=1657953 or http://dx.doi.org/10.2139/ssrn.1657953

John Armour

University of Oxford - Faculty of Law ( email )

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom
+44 1865 281616 (Phone)

HOME PAGE: http://www.law.ox.ac.uk/people/john-armour

University of Oxford - Said Business School ( email )

Park End Street
Oxford, OX1 1HP
Great Britain

HOME PAGE: http://www.sbs.ox.ac.uk/about-us/people/john-armour

European Corporate Governance Institute (ECGI) ( email )

B-1050 Brussels

HOME PAGE: http://www.ecgi.org

Jack B. Jacobs

Government of the State of Delaware - Court of Chancery ( email )

New Castle County Courthouse
500 N. King Street , Suite 11400
Wilmington, DE 19801-3734
United States
302-577-2441 (Phone)

Curtis J. Milhaupt (Contact Author)

Stanford Law School ( email )

559 Nathan Abbott Way
Stanford, CA 94305-8610
United States

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