Mark J. Roe, Takeover Politics, in The Deal Decade: What Takeovers and Leveraged Buyouts Mean for Corporate Governance 321 (Margaret M. Blair ed., Brookings Inst. 1993).
Abstract: Takeovers cannot be fully understood without understanding the role of American politics in finance. Politics prohibits some ownership structures and regulates or taxes others, often powerfully influencing corporate governance. Politics' influence on takeovers falls into two categories. First, politics fragmented American finance, facilitating the scattering of shareholders of large public companies. This scattering of shareholders set the stage for takeovers. Second, takeovers created winners and losers. Those at risk of loss in takeovers had the political muscle to get state legislatures to pass anti takeover laws. Financial fragmentation came first. Before the recent takeover wave, American politics fragmented financial institutions and their portfolios and weakened coordination among those financial institutions. American laws generally raised the institutions' cost of entering the corporate boardroom. Three determinants produced this result: American federalism, popular fear of concentrated economic power, and the power of interest groups.