Hostile Takeover Regimes in Asia: A Comparative Approach

Abstract

The market for corporate control (operating through hostile takeovers) acts as a key corporate governance mechanism to discipline corporate managers. However, the process and substance of regulating hostile takeovers differs remarkably among various jurisdictions. Existing and influential scholarship has focused on the differences in hostile takeover regulation between the United States (US) and the United Kingdom (UK), with the explanations being founded in interest group politics. We pose the question whether the theory can be extended outside of the US and the UK, particularly to their legal transplants in Asia. In the last few decades, several Asian jurisdictions have drawn heavily from the US and the UK when framing their own takeover regulation. Yet, Asia differs significantly from the US and the UK, particularly in respect of the much higher concentration of shareholdings among their publicly listed companies, and their institutions supporting takeover regulation, such as the securities regulator, the stock exchange and the judiciary. Thus, it is not surprising that the outcome of the substantive regulation also differs despite the legal transplantation, though there may be superficial formal convergence. The differences in takeover regulation and the reasons therefor have not been the subject matter of extensive study in the existing scholarship. Our study fills the gap by focusing on the regulation of hostile takeover regimes in Asia. In this article, drawing from an earlier work that studies, among others, takeover regulation in six significant Asian economies of China, Hong Kong, Japan, India, Korea and Singapore, we examine the differences in the takeover law and regulation between the exporting countries (US and the UK) and recipient countries (the six Asian economies), and we explain the reasons for the differences. In particular, we focus on three questions. First, what interest groups are relevant to the choice of initial takeover regulation in Asian economies? Second, after the selection has occurred, what are the reasons for the continued lack of functional convergence? Third, are there any unintended consequences of legal transplantation of the US or UK model of takeover regulation in the Asian economies? We argue that takeover regulation in Asia must be viewed through a lens that is different from the Anglo-American approach in view of the institutional factors that are at play when choices were (and are continuing to be) made. Our study has important implications on the academic debates on the efficacy of legal transplantations, comparative studies of hostile takeover regimes and the role of interest groups in shaping takeover regulation to a wider set of Asian countries than examined by current scholarship.