Corporate Law and Self-Regulation

43 Pages Posted: 27 Mar 2015 Last revised: 8 Apr 2015

See all articles by David Kershaw

David Kershaw

London School of Economics - Law School; European Corporate Governance Institute (ECGI)

Date Written: March 25, 2015


This paper explores the different ways in which market actors are 'co-opted' as corporate law regulators. It considers the preconditions for generating 'endogenous self-regulation' through the lens of the formation and operation of the UK Takeover Code and Panel. The paper argues that its incontrovertible success as a command, control and surveillance regulator is in large part attributable to merchant (investment) banking control over the production of the original Code and the ways in which the Code generates direct and indirect income opportunities for investment bankers in takeover activity, referred to in the paper as 'bribing the quarterback'. The paper also uses the Takeover Panel example to explore the unexpected regulatory biases that are generated by the survival and legitimacy concerns of the self-regulator itself. From endogenous self-regulation, the paper moves onto consider 'market-controlled' regulation where the state directly co-opts market actors as regulators. Using the example of 'comply or explain' corporate governance codes, the paper explores the powerful market-based enforcement drivers and argues that these drivers interact with a 'comply or explain' regulatory outlook that is likely to, and does, lead to sub-optimal regulation that overweighs accountability concerns. Setting these regulatory effects alongside the regulatory biases identified in the analysis of the Takeover Code, the paper shows that the regulatory biases generated by self-regulation are more multi-faceted than, and often inconsistent with, the standard account that self-regulation is likely to generate rules that favour the regulated.

Suggested Citation

Kershaw, David, Corporate Law and Self-Regulation (March 25, 2015). LSE Legal Studies Working Paper No. 5/2015, Available at SSRN: or

David Kershaw (Contact Author)

London School of Economics - Law School

Houghton Street
London WC2A 2AE, WC2A 2AE
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
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1000 Brussels

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