Abstract
This Article reexamines the existing theoretical framework of hostile takeover regulation, with the goal of aiding the development of an effective takeover regime for a changing Japan and other countries. Revising the takeover regime would support Japan’s decade-long objective of achieving sustained economic growth. With a burst of hostile takeover cases since 2021, Japan faces a long-sought “tipping point” as foreign investors take interest in the country’s recent innovation, capital efficiency, stock market performance, corporate governance reforms, and significant revisions to M&A best practice guidelines. Supported by a more welcoming attitude toward hostile takeovers, the old paradigm of “fortress Japan” is in the process of being supplanted by a new “market-oriented Japan.”
These changes both create a need for effective takeover regulation and present a new opportunity for the involvement of institutional players. Accordingly, there is a new urgency to reconsider both the theory and practice of Japan’s approach to regulating hostile takeovers, in order to update the current framework and create a takeover regime that is commensurate with Japan’s important position in global business and financial markets.
Research to date has generally emphasized the contrasting models of a shareholder-oriented UK system and a board-oriented US regime. In both cases a single “subordinate lawmaker”—the takeover panel in the UK and Delaware courts in the US—creates and enforces takeover rules. Under this analysis, Japan has a mixed and incomplete system of regulation with competing subordinate lawmakers. We highlight Australia as a “new” point of reference for hostile takeover regulation and institutions, as it lies “in-between” the US and the UK by separating the rulemaking and enforcement functions and creating a takeover panel with substantially limited authority and activities compared to the UK
We discern three basic roles in a framework for takeover regulation: (1) a “Rule-maker,” (2) a “Bid Decision-maker,” and (3) an “Umpire” (both adjudicator and propagator of standards of conduct and best practice norms). Applying this revised framework to Japan, we find that, although all relevant institutional players have improved their capabilities, the strength of shareholders has increased substantially more than that of courts and independent directors. Thus, the main weakness in the Japanese system is having the courts as the primary Umpire. Our main recommendation is that Japan consider an Australian-style limited takeover panel for its Umpire, along with a separate Rule-maker. We hope that our analysis will stimulate further research and discussion on a topic that is of renewed importance in Japan and elsewhere.
First Page
518
Repository Citation
Bruce
Aronson,
&
Manabu
Matsunaka,
Designing a New Framework to Regulate Hostile Takeovers in a Changing Japan,
20
U. Pa. Asian L. Rev.
518
(2025).
Available at:
https://scholarship.law.upenn.edu/alr/vol20/iss3/3