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European takeover regulation
[‘Efficient and inefficient sales of corporate control’]

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  • Erik Berglöf
  • Mike Burkart
Abstract
To foster corporate restructuring and capital market integration, the European Commission has repeatedly attempted to introduce Europe-wide takeover regulation, but has encountered strong resistance. We trace the sources of this resistance to differences in corporate governance arrangements across member states and outline the economic effects of takeover regulation, focusing in particular on possible provisions of particular relevance to the European debate. Regulation may stipulate that the same price be offered to all shareholders (a ‘mandatory bid’ rule) and/or that differentiation of voting-rights be voided when a bidder acquires a large enough portion of a firm’s shares (a ‘break-through’ rule). The impact of these and other rules depends on the existing structure of corporate ownership and control, which is very heterogeneous in Europe. And while a break-through rule promotes takeovers, a mandatory bid rule tends to prevent them. Hence, the two rules would tend to offset each other if introduced together, and introducing a strict mandatory bid rule alone would slow down corporate restructuring. We argue that hostile takeovers are a rather blunt instrument for achieving desirable contestability of control, and their regulation is only one of many corporate governance mechanisms to be honed in order to promote corporate restructuring in Europe.— Erik Berglöf and Mike Burkart

Suggested Citation

  • Erik Berglöf & Mike Burkart, 2003. "European takeover regulation [‘Efficient and inefficient sales of corporate control’]," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 18(36), pages 171-213.
    • Handle: RePEc:oup:ecpoli:v:18:y:2003:i:36:p:171-213.
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    File URL: http://hdl.handle.net/10.1111/1468-0327.00105
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    Cited by:

    1. Goergen, Marc & Manjon, Miguel C. & Renneboog, Luc, 2008. "Recent developments in German corporate governance," International Review of Law and Economics, Elsevier, vol. 28(3), pages 175-193, September.
    2. Marc Goergen, 2005. "Corporate Governance Convergence: Evidence From Takeover Regulation Reforms in Europe," Oxford Review of Economic Policy, Oxford University Press and Oxford Review of Economic Policy Limited, vol. 21(2), pages 243-268, Summer.
    3. Ehrhardt, Olaf & Lahr, Henry, 2008. "Uncertain private benefits and the decision to go public," CEFS Working Paper Series 2008-02, Technische Universität München (TUM), Center for Entrepreneurial and Financial Studies (CEFS).
    4. Sergey Stepanov, 2012. "Takeovers under Asymmetric Information: Block Trades and Tender Offers in Equilibrium," Working Papers w0185, Center for Economic and Financial Research (CEFIR).
    5. Simon Deakin, 2013. "The Legal Framework Governing Business Firms & its Implications for Manufacturing Scale & Performance: The UK Experience in International Perspective," Working Papers wp449, Centre for Business Research, University of Cambridge.
    6. Köhler, Matthias, 2008. "Blockholdings and Corporate Governance in the EU Banking Sector," ZEW Discussion Papers 08-110, ZEW - Leibniz Centre for European Economic Research.
    7. de La Bruslerie, Hubert, 2013. "Equal opportunity rule vs. market rule in transfer of control: How can private benefits help to provide an answer?," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 88-107.
    8. Marc Goergen & Miguel Manjon & Luc Renneboog, 2008. "Is the German system of corporate governance converging towards the Anglo-American model?," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 12(1), pages 37-71, March.
    9. Albuquerque, Rui & Schroth, Enrique, 2008. "Determinants of the Block Premium and of Private Benefits of Control," CEPR Discussion Papers 6742, C.E.P.R. Discussion Papers.
    10. Wang, Ying & Lahr, Henry, 2017. "Takeover law to protect shareholders: Increasing efficiency or merely redistributing gains?," Journal of Corporate Finance, Elsevier, vol. 43(C), pages 288-315.
    11. Mike Burkart & Samuel Lee, 2008. "One Share - One Vote: the Theory," Review of Finance, European Finance Association, vol. 12(1), pages 1-49.
    12. Sergey Stepanov, 2010. "Shareholder access to manager‐biased courts and the monitoring/litigation trade‐off," RAND Journal of Economics, RAND Corporation, vol. 41(2), pages 270-300, June.
    13. Santella, Paolo & Baffi, Enrico & Drago, Carlo & Lattuca, Dino, 2008. "A Comparative Analysis of the Legal Obstacles to Institutional Investor Activism in Europe and in the US," MPRA Paper 8929, University Library of Munich, Germany.
    14. Matt Glendening & Inder K. Khurana & Wei Wang, 2016. "The market for corporate control and dividend policies: Cross-country evidence from M&A laws," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 47(9), pages 1106-1134, December.
    15. Morten Bennedsen & Kasper Nielsen, 2004. "The Impact of a Break-Through Rule on European Firms," European Journal of Law and Economics, Springer, vol. 17(3), pages 259-283, May.
    16. Vlachos, Jonas, 2004. "Does Regulatory Harmonization Increase Bilateral Asset Holdings?," Working Paper Series 612, Research Institute of Industrial Economics.
    17. Hubert de La Bruslerie, 2010. "The Equal Opportunity Rule in Transfer of Control: A Contractual Model," Post-Print halshs-00636613, HAL.
    18. Norbäck, Pehr-Johan & Persson, Lars & Vlachos, Jonas, 2006. "Cross-Border Acquisitions and Corporate Taxes: Efficiency and Tax Revenues," Working Paper Series 663, Research Institute of Industrial Economics.
    19. Pajuste, Anete, 2005. "Determinants and consequences of the unification of dual-class shares," Working Paper Series 465, European Central Bank.
    20. Eckbo, B. Espen, 2009. "Bidding strategies and takeover premiums: A review," Journal of Corporate Finance, Elsevier, vol. 15(1), pages 149-178, February.
    21. Matthias Köhler, 2012. "Ownership structure, regulation and the market for corporate control in the EU banking sector," European Journal of Law and Economics, Springer, vol. 34(1), pages 173-196, August.
    22. repec:dau:papers:123456789/3189 is not listed on IDEAS
    23. Thraya, Mohamed Firas & Hamza, Taher, 2019. "Bidder excess control, target overpayment and control contestability: Evidence from France," The Quarterly Review of Economics and Finance, Elsevier, vol. 72(C), pages 178-190.
    24. Roberto Barontini & Lorenzo Caprio, 2006. "The Effect of Family Control on Firm Value and Performance: Evidence from Continental Europe," European Financial Management, European Financial Management Association, vol. 12(5), pages 689-723, November.

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    • F3 - International Economics - - International Finance
    • G3 - Financial Economics - - Corporate Finance and Governance

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