Skip to main content
SpringerLink
Log in

On the Supply Side of Western Hostile Takeover Law and Its Implications for China

  • Chapter
  • First Online:
Takeover Law in the UK, the EU and China

  • 327 Accesses

Abstract

The battle for corporate control may ultimately lead to the improvement of corporate governance, or the plunder of corporate wealth. The goal of hostile takeover regulation is to promote merit-adding takeovers while decreasing as much as possible the agency costs between corporate insiders and shareholders. Different practices in the US, the UK and the EU all have their merits and inadequacies. This research examines the western practices from a path dependence perspective, and offers insights for future Chinese hostile takeover legislation. For complex reasons and institutional factors, amendments to the law would be of little use in improving the hostile takeover regulations in China, and the main priority should be to discard the “CSRC centralism” dependency path that has been active for decades.

This research is supported by National Social Sciences Fund of China (Grant No. 20CFX006).

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution

Subscribe and save

Springer+ Basic
$34.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or eBook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Chapter
USD 29.95
Price excludes VAT (USA)
  • Available as PDF
  • Read on any device
  • Instant download
  • Own it forever
eBook
USD 129.00
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Softcover Book
USD 169.99
Price excludes VAT (USA)
  • Compact, lightweight edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info
Hardcover Book
USD 169.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Similar content being viewed by others

Notes

  1. 1.

    Fu (2017), p. 227.

  2. 2.

    See Demsetz and Lehn (1985), pp. 1155–1177. See also Jensen and Meckling (1976), pp. 305–360. See also Demsetz (1983), pp. 375–390.

  3. 3.

    Ventoruzzo (2006), p. 171.

  4. 4.

    See Carter et al. (2003), pp. 33–53.

  5. 5.

    Hoover and Roosevelt (1952).

  6. 6.

    See Benston (1973), pp. 132–155.

  7. 7.

    Hurst (2010), pp. 1–20.

  8. 8.

    See Ikenberry and Lakonishok (1993), pp. 405–435.

  9. 9.

    See Bebchuk (1982) pp. 23–50.

  10. 10.

    See Arsht and Stapleton (1967), p. 75.

  11. 11.

    See Nourse (1996), p. 1331.

  12. 12.

    Roe (1996), p. 3.

  13. 13.

    See Robert (2009), pp. 1–362.

  14. 14.

    See Benati (2004), pp. 691–717.

  15. 15.

    Id.

  16. 16.

    See Sheppard (2013).

  17. 17.

    Armour and Skeel (2006), p. 1739.

  18. 18.

    See Roberts (1992), pp. 183–200.

  19. 19.

    See Johnston (1980).

  20. 20.

    See Deakin et al. (2002).

  21. 21.

    Armour and Skeel (2006), p. 1769.

  22. 22.

    Id.

  23. 23.

    Linyao Tang (2017c), p. 129.

  24. 24.

    See Edwards (2004), pp. 416–439.

  25. 25.

    Armour and Skeel Jr (2006), p. 1763.

  26. 26.

    Hart (1992), p. 843.

  27. 27.

    See Sorkin (2010).

  28. 28.

    Keller and Gehlmann (1988), p. 329.

  29. 29.

    Brown (1970), p. 1637.

  30. 30.

    See Mitchell and Netter (1994), pp. 545–590.

  31. 31.

    See Steinmo (1994), pp. 9–17.

  32. 32.

    See Dong and Ozkan (2008), pp. 16–29. See also Khan (2006).

  33. 33.

    See Goergen and Renneboog (1998).

  34. 34.

    Armour and Skeel (2006), pp. 1760–1770.

  35. 35.

    Id.

  36. 36.

    See Deakin et al. (2002).

  37. 37.

    See Schneper and Guillén (2004), pp. 263–295.

  38. 38.

    Bainbridge (2005), p. 1735.

  39. 39.

    See Karpoff et al. (1996), pp. 365–395.

  40. 40.

    Armour and Skeel (2006), p. 1727.

  41. 41.

    See Michie (2012).

  42. 42.

    Tang (2017c), p. 113-197.

  43. 43.

    Tang (2017a), pp. 68–76.

  44. 44.

    See Bai et al. (2004), pp. 599–616. See also Cai (2012), p. 901.

  45. 45.

    Tang (2017c), p. 164.

  46. 46.

    2014 Company Law, Article 98.

  47. 47.

    Id, at Article 126. Some originally-born-in-China companies achieved the ownership structure by re-incorporating in the Cayman Islands and having their IPO either in HKSE or NYSE, for instance, Alibaba.

  48. 48.

    Id, at Article 103.

  49. 49.

    2014 Securities Law, Article 13.

  50. 50.

    2014 Company Law, Article 142.

  51. 51.

    2014 Securities Law, Article 16.

  52. 52.

    2014 Securities Law, Article 22 and Article 24.

  53. 53.

    Administrative Rules on Acquisition, Article 75.

  54. 54.

    2014 Securities Law, Article 47.

  55. 55.

    Administrative Rules on Acquisition, Article 8.

  56. 56.

    2014 Company Law, Article 147.

  57. 57.

    Guidelines on Article of Associations, Article 98.

  58. 58.

    2014 Securities Law, Article 88 and Article 96.

  59. 59.

    Administrative Rules on Acquisition, Article 62.

  60. 60.

    2014 Securities Law, Article 51.

  61. 61.

    2014 Company Law, Article 102.

  62. 62.

    See Huang (2008), pp. 153–175.

  63. 63.

    Unocal v. Mesa Petroleum Co., 493 A.2d 946 (Del. 1985).

  64. 64.

    Huang (2008), pp. 153–175.

  65. 65.

    See Lee (2006), p. 897.

  66. 66.

    See Nikkel (1995), p. 503.

  67. 67.

    See Augur (2000), pp. 1–16.

  68. 68.

    See Christmann and Taylor (2001), pp. 439–458.

  69. 69.

    2014 Securities Law, Article 8, 102, 174.

  70. 70.

    See Jordan and Hughes (2007), p. 205.

  71. 71.

    CSRC. Administrative Measures of Stock Exchanges, Article 22.

  72. 72.

    CSRC. Administrative Measures of Stock Exchanges, Article 23.

  73. 73.

    2014 Securities Law, Article 107.

  74. 74.

    CSRC. Administrative Measures of Stock Exchanges, Article 19.

  75. 75.

    CSRC. Administrative Measures of Stock Exchanges, Article 28.

  76. 76.

    See Wei (2005), p. 479.

  77. 77.

    Tang (2017c), p. 170.

  78. 78.

    2014 Administrative Rules on Acquisition, Art.33.

  79. 79.

    Tang (2017c), p. 171.

  80. 80.

    Council Directive 2004/25, art. 9, 2004 O.J. (L142) 8 (EC).

  81. 81.

    Tang (2017c), p. 172.

  82. 82.

    See 2014 Securities Law, Article 88.

  83. 83.

    See the City Code, Part F1, Rule 9.

  84. 84.

    Council Directive 2004/25, Art. 5, 2004 O.J. (L142) 8 (EC).

  85. 85.

    The 90th United States Congress, Williams Act (82 Stat. 455), Section 14d, Section 14e.

  86. 86.

    Council Directive 2004/25, Art. 5(3), 2004 O.J. (L142) 8 (EC).

  87. 87.

    Hungary and Slovenia have a triggering point of 25% voting rights; Austria, Belgium, Cyprus, Germany, Finland, Ireland, Italy, the Netherlands, Spain and Sweden have a triggering point of 30% voting rights; Greece, France, Luxembourg and Slovakia have a triggering point of 1/3 voting rights (33.33% voting rights);Czech Republic and Lithuania have a triggering point of 40% voting rights; Latvia, Malta and Portugal have a triggering point of 50% voting rights; Poland has a triggering point of 66% voting rights. See COMMISSION OF THE EUROPEAN COMMUNITIES. Report on the implementation of the Directive on Takeover Bids. Brussels, 21.02.2007.SEC(2007)268. Annex 2.

  88. 88.

    Id.

  89. 89.

    Tang (2018), pp. 47–48.

  90. 90.

    Easterbrook and Fischel (1981), pp. 1161–1204. Partial offer is definitely cheaper, the acquirer only have to acquire as much shares as he needs.

  91. 91.

    Id. Compare with partial offer, general offer provides minority shareholders more protection.

  92. 92.

    Tang (2017b), pp. 106–114.

  93. 93.

    See Li et al. (2009).

  94. 94.

    2014 Securities Law, Article 8, 102, 174.

  95. 95.

    See Wei (2005), p. 479.

  96. 96.

    Jensen (1986), pp. 323–329.

  97. 97.

    Tang (2017c), p. 171.

  98. 98.

    COMMISSION OF THE EUROPEAN COMMUNITIES. Report on the implementation of the Directive on Takeover Bids. Brussels, 21.02.2007.SEC(2007)268. Annex 3.

  99. 99.

    Changxing Sun (2009), pp. 28–30.

  100. 100.

    See Li et al. (2009).

  101. 101.

    See Kling and Gao (2008), pp. 374–387.

  102. 102.

    See Bailey et al. (2009), pp. 9–19.

References

  • Armour J, Skeel DA Jr (2006) Who writes the rules for hostile takeovers, and why-the peculiar divergence of US and U.K. takeover regulation. Geo Law J 95:1727–1770

    Google Scholar 

  • Arsht SS, Stapleton WK (1967) Delaware’s new general corporation law: substantive changes. Bus Law 23:75

    Google Scholar 

  • Augur P (2000) The death of gentlemanly capitalism. Penguin, pp 1–16

    Google Scholar 

  • Bai C-E et al (2004) Corporate governance and market valuation in China. J Comp Econ 32(4):599–616

    Google Scholar 

  • Bailey W et al (2009) Stock returns, order imbalances, and commonality: evidence on individual, institutional, and proprietary investors in China. J Bank Financ 33(1):9–19

    Google Scholar 

  • Bainbridge SM (2005) Director primacy and shareholder disempowerment. Harv Law Rev 119:1735

    Google Scholar 

  • Bebchuk LA (1982) The case for facilitating competing tender offers: a reply and extension. Stanford Law Rev:23–50

    Google Scholar 

  • Benati L (2004) Evolving post-World War II U.K. economic performance. J Money Credit Bank 36(4):691–717

    Article  Google Scholar 

  • Benston GJ (1973) Required disclosure and the stock market: an evaluation of the Securities Exchange Act of 1934. Am Econ Rev 63:132–155

    Google Scholar 

  • Brown MM (1970) The scope of the Williams Act and Its 1970 Amendments. Bus Law 26:1637

    Google Scholar 

  • Cai W (2012) Hostile takeovers and takeover defences in China. Hong Kong Law J 42:901

    Google Scholar 

  • Carter DA, Simkins BJ, Gary Simpson W (2003) Corporate governance, board diversity, and firm value. Financ Rev 38(1):33–53

    Google Scholar 

  • Changxing Sun JQ (2009) Problems and countermeasures of the securities market self-regulation in China. Res Rule Law 10:28–30

    Google Scholar 

  • Christmann P, Taylor G (2001) Globalization and the environment: determinants of firm self-regulation in China. J Int Bus Stud 32(3):439–458

    Article  Google Scholar 

  • Deakin S et al (2002) Implicit contracts, takeovers and corporate governance: in the shadow of the City Code. University of Cambridge

    Google Scholar 

  • Demsetz H, Lehn K (1985) The structure of corporate ownership: causes and consequences. J Polit Econ 93(6):1155–1177

    Article  Google Scholar 

  • Demsetz H (1983) The structure of ownership and the theory of the firm. J Law Econ 26(2):375–390

    Article  Google Scholar 

  • Dong M, Ozkan A (2008) Institutional investors and director pay: an empirical study of U.K. companies. J Multinatl Financ Manage 18(1):16–29

    Article  Google Scholar 

  • Easterbrook FH, Fischel DR (1981) The proper role of a target’s management in responding to a tender offer. Harv Law Rev 94:1161–1204. Partial offer is definitely cheaper, the acquirer only have to acquire as much shares as he needs

    Google Scholar 

  • Edwards V (2004) The Directive on takeover bids–not worth the paper it’s written on? Eur Comp Financ Law Rev 1(4):416–439

    Google Scholar 

  • Fu Q (2017) Legal standing of hostile takeover. China Legal Sci 3:227

    Google Scholar 

  • Goergen M, Renneboog L (1998) Strong managers and passive institutional investors in the U.K. Available at SSRN 137068

    Google Scholar 

  • Hart MA (1992) Decimal stock pricing: dragging the securities industry into the twenty-first century. Loyola LAL Rev 26:843

    Google Scholar 

  • Hoover HC, Roosevelt FD (1952) Inflation overproduction. In: The great depression. Macmillan

    Google Scholar 

  • Huang H (2008) The new takeover regulation in China: evolution and enhancement. Int Lawyer 42:153–175

    Google Scholar 

  • Hurst JW (2010) The legitimacy of the business corporation in the law of the United States, 1780–1970. Lawbook Exchange Ltd, pp 1–20

    Google Scholar 

  • Ikenberry D, Lakonishok J (1993) Corporate governance through the proxy contest: evidence and implications. J Bus 66:405–435

    Article  Google Scholar 

  • Jensen MC (1986) Agency costs of free cash flow, corporate finance, and takeovers. Am Econ Rev 76(2):323–329

    Google Scholar 

  • Jensen MC, Meckling WH (1976) Theory of the firm: managerial behavior, agency costs and ownership structure. J Financ Econ 3(4):305–360

    Article  Google Scholar 

  • Johnston A (1980) The city take-over code. Oxford Univercity Press

    Google Scholar 

  • Jordan C, Hughes P (2007) Which way for market institutions: The fundamental question of self-regulation. Berkeley Bus Law J 4:205

    Google Scholar 

  • Karpoff JM, Malatesta PH, Walkling RA (1996) Corporate governance and shareholder initiatives: empirical evidence. J Financ Econ 42(3):365–395

    Article  Google Scholar 

  • Keller E, Gehlmann GA (1988) Introductory comment: a historical introduction to the Securities Act of 1933 and the Securities Exchange Act of 1934. Ohio St Law J 49:329

    Google Scholar 

  • Khan T (2006) Company dividends and ownership structure: Evidence from U.K. panel data. Econ J 116:510

    Article  Google Scholar 

  • Kling G, Gao L (2008) Chinese institutional investors’ sentiment. J Int Financ Mark Inst Money 18(4):374–387

    Article  Google Scholar 

  • Lee R (2006) Fiduciary duty without equity: fiduciary duties of directors under the revised company law of the PRC. Va J Int Law 47:897

    Google Scholar 

  • Li W, Rhee G, Wang SS (2009) Differences in herding: individual vs. institutional investors in China. Institutional Investors in China (SSRN: February 13, 2009)

    Google Scholar 

  • Michie R (2012) The London and New York stock exchanges 1850–1914 (Routledge Revivals). Routledge

    Google Scholar 

  • Mitchell ML, Netter JM (1994) The role of financial economics in securities fraud cases: applications at the securities and exchange commission. Bus Lawyer 49:545–590

    Google Scholar 

  • Nikkel MI (1995) Chinese characteristics in corporate clothing: questions of fiduciary duty in China’s company law. Minn Law Rev 80:503

    Google Scholar 

  • Nourse V (1996) Passion’s progress: modern law reform and the provocation defense. Yale Law J 106:1331

    Article  Google Scholar 

  • Robert IM (2009) A social history of company law: great Britain and the Australian colonies 1854–1920. Ashgate, pp 1–362

    Google Scholar 

  • Roberts R (1992) Regulatory responses to the rise of the market for corporate control in Britain in the 1950s. Bus Hist 34(1):183–200

    Article  Google Scholar 

  • Roe MJ (1996) Strong managers, weak owners. Princeton University Press, p 3

    Google Scholar 

  • Schneper WD, Guillén MF (2004) Stakeholder rights and corporate governance: a cross-national study of hostile takeovers. Adm Sci Q 49(2):263–295

    Google Scholar 

  • Sheppard DK (2013) The growth and role of U.K. Financial Institutions, 1880–1966. Routledge

    Google Scholar 

  • Sorkin AR (2010) Too big to fail: the inside story of how wall street and Washington fought to save the financial system--and themselves. Penguin

    Google Scholar 

  • Steinmo S (1994) The end of redistribution? International pressures and domestic tax policy choices. Challenge 37(6):9–17

    Article  Google Scholar 

  • Tang L (2017a) On exemption of tender offer: a comparative perspective. Symp Econ Law 2:68–76

    Google Scholar 

  • Tang L (2017b) On tender offer in takeovers of chinese listed company. Soc Sci 10:106–114

    Google Scholar 

  • Tang L (2017c) Power allocation in hostile takeover regulation: rethinking chinese fiduciary duty, board neutrality rule and shareholder rights. Tohoku Law Rev 47:113–197

    Google Scholar 

  • Tang L (2018) Technical rules in Chinese M&A: a scrutiny. Tohoku Law Rev 49:47–48

    Google Scholar 

  • Ventoruzzo M (2006) Europe’s thirteenth Directive and US takeover regulation: regulatory means and political and economic ends. Tex Int Law J 41:171

    Google Scholar 

  • Wei Y (2005) The development of the securities market and regulation in China. Loy LA Int Comp Law Rev 27:479

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. School of Law, Tsinghua University, Beijing, China

    Ciyun Zhu

  2. Institute of Law, Chinese Academy of Social Sciences, Beijing, China

    Linyao Tang

Authors
  1. Ciyun Zhu
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Linyao Tang
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Ciyun Zhu .

Editor information

Editors and Affiliations

  1. School of Law, University of Exeter, Exeter, UK

    Joseph Lee

Rights and permissions

Reprints and permissions

Copyright information

© 2021 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Zhu, C., Tang, L. (2021). On the Supply Side of Western Hostile Takeover Law and Its Implications for China. In: Lee, J. (eds) Takeover Law in the UK, the EU and China. Springer, Cham. https://doi.org/10.1007/978-3-030-72345-3_3

Download citation

  • DOI: https://doi.org/10.1007/978-3-030-72345-3_3

  • Published:

  • Publisher Name: Springer, Cham

  • Print ISBN: 978-3-030-72344-6

  • Online ISBN: 978-3-030-72345-3

  • eBook Packages: Law and CriminologyLaw and Criminology (R0)

Publish with us

Policies and ethics

Search

Navigation