Papers on Comparative Corporate Law and Governance in Asia

  1. Hostile Takeover Regimes in Asia: A Comparative Approach, which I have co-authored with Wai Yee Wan. The abstract is as follows:

“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.”

2. Related Party Transactions in Commonwealth Asia: Complexity Revealed, which I have co-authored with Dan Puchniak. The abstract is as follows:

“The World Bank’s influential Doing Business Report (DBR) has been a key platform for the American-driven dissemination of global norms of good corporate governance. A prominent part of the DBR is the related party transactions (RPT) index, which ranks 190 jurisdictions from around the world on the quality of their laws regulating RPTs. According to the RPT Index, the regulation of RPTs in Commonwealth Asia’s most important economies is stellar. In the latest RPT Index, Singapore ranked 1st, Hong Kong 3rd, Malaysia 5th, and India 20th. However, despite the uniformly high RPT Index scores in all of Commonwealth Asia’s most important economies, empirical, case-study, and anecdotal evidence overwhelmingly suggests that there are in practice significant inter-jurisdictional and intra-jurisdictional differences in the actual function and regulation of RPTs in Commonwealth Asia. 

In this chapter, we assert that the conspicuous gap between what the RPT Index suggests should be occurring and what is actually occurring in Commonwealth Asia exists because it fails to capture the complexity of RPTs in three respects, which we term: (1) regulatory complexity; (2) shareholder complexity; and, (3) normative complexity. First, it appears that the RPT Index overly emphasizes the role played by a jurisdiction’s formal corporate and securities laws in determining the effectiveness of its RPT regulation, and it fails to pay due regard to its corporate culture and rule of law norms in determining the efficiency of its RPT regulation. Second, the RPT Index erroneously assumes that controlling shareholders are a homogeneous group driven by similar incentives. Third, the general assumption that RPTs per se are evidence of defective corporate governance and that stricter regulation of RPTs consequently equates to “good law” is erroneous. 

Demonstrating the frailties of the RPT Index is important in practice because jurisdictions – especially developing ones – commonly look to the DBR and its indices when reforming their laws. In addition, the intellectual foundation of the RPT Index also makes the findings in our chapter academically significant.”

Both the papers discuss the respective topics with reference to India, but they do so in the broader Asian context.

 

About the author

Umakanth Varottil

Umakanth Varottil is an Associate Professor at the Faculty of Law, National University of Singapore. He specializes in corporate law and governance, mergers and acquisitions and cross-border investments. Prior to his foray into academia, Umakanth was a partner at a pre-eminent law firm in India.

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