State and Federal Regulation of Corporate Takeovers: A View From the Demand Side

Abstract

INTRODUCTION The study of corporate law stands at an important crossroads. Recent events have brought into sharp focus a variety of unanswered questions and interesting and important contradictions inherent in much of the received wisdom about corporate governance. For example, it often is argued that corporate takeovers transfer wealth from firms' corporate stakeholders-particularly their bondholders and employees-to their shareholders. On the other hand, it also is argued that the regulation of corporate takeovers under state law transfers wealth from shareholders to these very same stakeholders-bondholders and corporate employees. It is mysterious why the shareholders should be so successful at effectuating intra-firm wealth transfers, and yet be so unsuccessful at accomplishing legislative wealth transfers.