Abstract

https://ssrn.com/abstract=2766208
 


 



New Agency Problems, New Legal Rules: Rethinking Takeover Regulation in the US and Europe


Aurelio Gurrea-Martínez


Harvard Law School; Instituto Iberoamericano de Derecho y Finanzas (IIDF)

November 12, 2016

Ibero-American Institute for Law and Finance, Working Paper Series 3/2016

Abstract:     
The main agency problem traditionally existing in the US corporation has been the risk of opportunism of managers vis-à-vis shareholders while the primary concern in European corporations has been the risk of opportunism of controlling shareholders vis-à-vis minority shareholders. These divergences in agency problems and the design of corporate law in the US and Europe has been mainly explained or, at least, justified by the different corporate ownership structures in both regions. On the one hand, the US has been traditionally classified as a jurisdiction with dispersed shareholders where collective action problems, asymmetric information and rational apathy were considered crucial problems in corporate law. On the other hand, European countries have been more concerned with the protection of minority shareholders from the expropriation of controlling shareholders. However, the rise of shareholder activism, the reconcentration of corporate ownership structures in the hands of institutional investors, and the use of dual-class shares have changed those agency problems traditionally existing in US corporations. Likewise, the development of capital markets, the improvement of corporate governance practices and the rise of shareholder activism have also modified, though to a lesser extent, those agency problems existing in European corporations. Therefore, these new agency problems should lead to rethink European and US corporate law, especially in the context of hostile takeovers, where weighted agency problems may arise among corporate actors. On the basis of this exercise, we draw conclusions about those rules governing hostile takeovers that should be amended in order to effectively address the agency problems existing in the European and US corporation of the 21st century.

Number of Pages in PDF File: 37

Keywords: Agency Problems, Shareholder Activism, Institutional Investors, Takeover Law, Mandatory Bid Rule, Anti-Takeover Measure, Board Neutrality Rule, Reverse Neutrality Rule

JEL Classification: K22


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Date posted: April 19, 2016 ; Last revised: November 14, 2016

Suggested Citation

Gurrea-Martínez, Aurelio, New Agency Problems, New Legal Rules: Rethinking Takeover Regulation in the US and Europe (November 12, 2016). Ibero-American Institute for Law and Finance, Working Paper Series 3/2016. Available at SSRN: https://ssrn.com/abstract=2766208

Contact Information

Aurelio Gurrea-Martínez (Contact Author)
Harvard Law School ( email )
Cambridge, MA 02138
United States
Instituto Iberoamericano de Derecho y Finanzas (IIDF) ( email )
C/ Bárbara de Braganza 11, 3º
Madrid, 28004
Spain
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