Posted: 11 Aug 1999 Last revised: 5 May 2009
This paper analyzes certain important shortcomings of state competition in corporate law. In particular, we show that, with respect to takeovers, states have incentives to produce rules that excessively protect incumbent managers. The development of state takeover law, we argue, is consistent with our theory. States have adopted antitakeover statutes that have little policy basis, and, more importantly, they have provided managers with a wider and more open-ended latitude to engage in defensive tactics than endorsed even by the commentators most favorable to such tactics. Furthermore, states have elected, even though they could have done otherwise, to impose antitakeover protections on shareholders, who did not appear to favor them, in a way that left shareholders with little choice or say. Finally, we conclude by pointing out that proponents of state competition cannot reconcile their views with the evolution of state takeover law--and should therefore reconsider their unqualified support of state competition.
JEL Classification: G30, G34, G38, H70
Suggested Citation: Suggested Citation
Bebchuk, Lucian A. and Ferrell, Allen, Federalism and Takeover Law: The Race to Protect Managers from Takeovers. Columbia Law Review, Vol. 99, No. 5, pp. 1168-1200, June 1999; Reprinted in Regulatory Competition and Economic Integration (D. Esty and D. Geradin, ed., Oxford University Press) pp. 68-94, 2001; Harvard Law and Economics Discussion Paper No. 257, June 1999. Available at SSRN: https://ssrn.com/abstract=169189