The hostile takeover dilemma: comparative analysis and regulatory recommendations for China

Kruszewska, Ewa Maria (2019) The hostile takeover dilemma: comparative analysis and regulatory recommendations for China. PhD thesis, University of Nottingham.

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Despite China’s impressive economic growth, many Chinese listed firms still suffer from weak financial performance. Corporate takeovers are often thought to be a cure for the problems of underperforming companies as they help to discipline managers ex-ante and allow to replace the board if it deviates from the firm’s interests. The effectiveness of the market for corporate control has, however, been challenged over the years; no single theory can nowadays definitively encapsulate the nature and effects of hostile takeovers, and the various empirical studies do not lead to firm conclusions regarding their alleged benefits.

Due to the concentrated ownership structure and the lack of legal certainty, hostile takeovers currently remain a rare phenomenon in China, but it is envisaged that their number will rise in the coming years. Despite regulatory efforts, China’s takeover regime remains ambiguous at times, lacking predictability, especially in the area of the role of target directors. The problem may lay in the fact that China’s takeover regime has been developed through legal transplantation adopting the features of takeover regulations of both the United Kingdom and the United States, which differ substantially, particularly in their approach to the use of takeover defences by the board. This thesis investigates the current position of target directors in a takeover context, especially in the area of directors’ authority to adopt anti-takeover measures, exploring the existing uncertainties and areas of concern. It strives to understand the reasons behind the shape of China’s current takeover regime and attempts to assess whether the regime is suitable for China taking into account its legal, economic, political and social environment. It discovers the prevalence of type II agency problems between the controlling and minority shareholders in Chinese listed companies, which are unlikely to be solved by the monitoring and disciplining function of the market for corporate control. To the contrary, the thesis discusses risks associated with the strict ‘no frustration rule’ in China which tend to facilitate takeover transactions. Finally, the thesis offers reform recommendations for takeover regime which may help China to achieve its set objectives with the performance improvement of China’s listed companies being amongst the most important ones.

Item Type: Thesis (University of Nottingham only) (PhD)
Supervisors: Frisby, Sandra
Wang, Ping
Keywords: takeover regulation, China, hostile takeovers, takeover defences
Subjects: K Law > KM Asia
Faculties/Schools: UK Campuses > Faculty of Social Sciences, Law and Education > School of Law
Item ID: 60131
Depositing User: Kruszewski, Ewa
Date Deposited: 29 Sep 2023 05:52
Last Modified: 29 Sep 2023 05:52

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