Global Antitakeover Devices

Abstract

This Article explores a “hidden” mechanism that insulates management from hostile takeovers and activist intervention: the global antitakeover device (“GAD”). A GAD is based on the ability of public firms to “mix and match” between different forms of regulations through cross-listing in multiple stock exchanges or incorporation in foreign jurisdictions. This action subjects any hostile engagement with these firms to multiple jurisdictions’ regulatory frameworks and creates regulatory barriers, complexity, and uncertainty. This Article provides a comprehensive analysis of these GADs, the costs they generate to potential bidders, and the unique feature they have in comparison to traditional antitakeover devices. GADs are not an isolated phenomenon. Their potential economic impact is significant, as one in seven firms traded on U.S. exchanges are incorporated or cross-listed in foreign jurisdictions. Moreover, the impact of these devices could extend beyond the market for corporate control, as foreign firms could also enjoy a partial insulation from activist hedge funds. The Article also offers policy recommendations for overcoming GADs’ insulation from takeover attempts and activism.

Keywords: corporations, cross listing, dual-listing, corporate inversions, antitakeover devices, corporate governance, agency costs, globalization

JEL Classification: G32, G34, K22