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The Future of Hostile Takeovers: Legislation and Public Opinion, 57 University of Cincinnati Law Review 457 (1988)


Recent state takeover regulation has reinvigorated the debate
over which level of government, state or federal, produces superior
corporation laws. Management, which vigorously supports state
legislation, has a conflict of interest concerning bids: successful
takeovers can jeopardize its employment. Shareholders, however,
are benefited by successful offers as they receive the bid premium,
and they are benefited by the threat of offers, which keeps management
on its toes. Most commentators, accordingly, consider state
takeover laws to be troubling features in corporation codes because
of the conflict of interest between managers and shareholders. The
statutes make hostile takeovers more difficult, and any increase in a
bidder's costs reduces the number of bids that will occur, which
weakens the disciplining effect of the market for corporate control
on managers. Consequently, as state legislatures have responded to
management pleas to restrict hostile takeovers, there have been calls
for federal legislation to preempt state takeover regulation. Partly
due to lingering concern over the constitutionality of state takeover
statutes, the supporters of restrictive legislation have, however, always
worked on parallel fronts, advocating greater federal regulation
of takeovers at the same time as they championed state takeover
laws. The focus of this Article is on the wisdom of promoting further
federal action on takeovers.

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