The Institutional Context of Hostile Takeover Activity: a Cross-national Test

There are sharp and persistent differences in the level of hostile takeover activity across countries. Building on institutional theory and the concept of social legitimacy, we predict that common-law (English) corporate legal traditions, policymaking stability, the extent to which stock trading is formalized, and individualism as a cultural trait increase the level of hostile takeover activity in a given country. We expect the presence of powerful and militant stakeholders such as labor and banks, by contrast, to reduce hostile takeovers. We test these hypotheses with a pooled cross-national, longitudinal dataset spanning 54 countries between 1988 and 1998. Regression results show that English-based corporate laws, policymaking stability, low bank concentration, and individualism increase the occurrence of hostile takeovers. We find no consistent effects for formalized stock trading or militant labor unions.