Implicit contracts, takeovers and corporate governance: in the shadow of the city code
AbstractThis paper offers a qualitative, case-study based analysis of hostile takeover bids mounted in the UK in the mid-1990s under the regime of the City Code on Takeovers and Mergers. It is shown that during bids, directors of bid targets focus on the concerns of target shareholders to the exclusion of other stakeholder groups. A review of the case studies five years on find that, almost withouth exception, mergers led to large-scale job losses and asset disposals. However, almost none of the bids were considered by financial commentators, at this point, to have generated shareholder value for investors in that merged company. While there is therefore clear evidence that the Takeover Code is effective in protecting the interests of target shareholders, the implications of the Code for efficiency in corporate performance are much less certain.
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Bibliographic InfoPaper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp254.
Date of creation: Dec 2002
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hostile takeovers; stakeholding; implicit contracts; breach of trust;
Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-12-09 (All new papers)
- NEP-CFN-2002-12-09 (Corporate Finance)
- NEP-IND-2002-12-09 (Industrial Organization)
- NEP-LAW-2002-12-09 (Law & Economics)
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