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The Future of Hostile Takeovers: Legislation and Public Opinion

By Roberta Romano

Abstract

Recent state takeover regulation has reinvigorated the debateover which level of government, state or federal, produces superiorcorporation laws. Management, which vigorously supports statelegislation, has a conflict of interest concerning bids: successfultakeovers can jeopardize its employment. Shareholders, however,are benefited by successful offers as they receive the bid premium,and they are benefited by the threat of offers, which keeps managementon its toes. Most commentators, accordingly, consider statetakeover laws to be troubling features in corporation codes becauseof the conflict of interest between managers and shareholders. Thestatutes make hostile takeovers more difficult, and any increase in abidder\u27s costs reduces the number of bids that will occur, whichweakens the disciplining effect of the market for corporate controlon managers. Consequently, as state legislatures have responded tomanagement pleas to restrict hostile takeovers, there have been callsfor federal legislation to preempt state takeover regulation. Partlydue to lingering concern over the constitutionality of state takeoverstatutes, the supporters of restrictive legislation have, however, alwaysworked on parallel fronts, advocating greater federal regulationof takeovers at the same time as they championed state takeoverlaws. The focus of this Article is on the wisdom of promoting furtherfederal action on takeovers

Topics: Law
Publisher: Yale Law School Legal Scholarship Repository
Year: 1988
OAI identifier: oai:digitalcommons.law.yale.edu:fss_papers-2999
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