Takeover Politics

The Deal Decade, M. Blair, ed., The Brookings Institution, 1993

68 Pages Posted: 8 Feb 2015

Date Written: 1993

Abstract

Takeovers cannot be fully understood without understanding the role of American politics in finance. Politics prohibits some ownership structures and regulates or taxes others, often powerfully influencing corporate governance. Politics' influence on takeovers falls into two categories. First, politics fragmented American finance, facilitating the scattering of shareholders of large public companies. This scattering of shareholders set the stage for takeovers. Second, takeovers created winners and losers. Those at risk of loss in takeovers had the political muscle to get state legislatures to pass anti takeover laws.

Financial fragmentation came first. Before the recent takeover wave, American politics fragmented financial institutions and their portfolios and weakened coordination among those financial institutions. American laws generally raised the institutions' cost of entering the corporate boardroom. Three determinants produced this result: American federalism, popular fear of concentrated economic power, and the power of interest groups.

Keywords: jostile takeovers, mergers and acquisitions, state competition

Suggested Citation

Roe, Mark J., Takeover Politics (1993). The Deal Decade, M. Blair, ed., The Brookings Institution, 1993. Available at SSRN: https://ssrn.com/abstract=2561056

Mark J. Roe (Contact Author)

Harvard Law School ( email )

Griswold 502
Cambridge, MA 02138
United States
617-495-8099 (Phone)
617-495-4299 (Fax)

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