European Takeover Regulation

Posted: 15 Jul 2003

See all articles by Erik Berglöf

Erik Berglöf

Institute of Global Affairs, London School of Economics and Political Science

Mike Burkart

Swedish House of Finance; London School of Economics and Political Science, Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Abstract

In its quest for more corporate restructuring and a single market for capital, the European Commission is pushing for Europe-wide takeover regulation. Previous attempts have failed largely due to differences in corporate governance arrangements across Member States. This article provides a framework for evaluating the effects of takeover regulation. We apply this framework to some specific proposals in the European debate and show that their impact often depends critically on the structure of ownership and control. In particular, two of the most discussed rules, the strict mandatory bid rule and the break-through rule, have no impact when ownership is dispersed. Also, the proposed break-through rule would only affect firms with dual-class shares but not firms that use other control instruments. Moreover, the two rules would effectively counteract each other, the break-through rule promoting takeovers and the mandatory bid rule impeding them. Introducing a strict mandatory bid rule alone, as the Commission proposed, would slow down restructuring. We argue that while increased contestability of control is desirable hostile takeovers are a rather blunt instrument for achieving this. The market for corporate control is only one of many corporate governance mechanisms to be honed in order to promote corporate restructuring in Europe.

Keywords: Takeover regulation, corporate governance, European Union, corporate law

JEL Classification: G1, G3, K2

Suggested Citation

Berglöf, Erik and Burkart, Mike C., European Takeover Regulation. Economic Policy, Vol. 36, 2003. Available at SSRN: https://ssrn.com/abstract=415841

Erik Berglöf (Contact Author)

Institute of Global Affairs, London School of Economics and Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Mike C. Burkart

Swedish House of Finance ( email )

Drottninggatan 98
111 60 Stockholm
Sweden

London School of Economics and Political Science, Department of Finance ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

HOME PAGE: http://www.cepr.org/default_static.htm

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
1,589
PlumX Metrics