Political Economy of Takeover Regulation in India:How Good is India’s Mandatory Bid Rule?

The political economy/interest group theory has emerged as a powerful framework for understanding the differences between takeover regulation in advanced economies like the United States (U.S.) and United Kingdom (U.K.). However, what is largely missing is whether the theory can be extended outside of the U.S. and the U.K., particularly to explain the motivations behind (and the impact of) transplanting takeover law principles from the U.S. and/or the U.K. to other jurisdictions. This article contributes to the ongoing discourse by testing the applicability of the interest group theory offered by Armour and Skeel to explain India’s transplant of U.K.’s mandatory bid rule (MBR) in its regulatory framework governing takeovers. In concluding that the Armour and Skeel theory does not fully explain India’s transplant experiment, this article not only underscores how transplanting takeover law concepts from a country of origin that is fundamentally different from the host country may result in wholly different outcomes, it also constructs a theoretical framework to demonstrate why and how the Indian version of the MBR has resulted in the reverse outcome of entrenching incumbents and shielding them from the disciplining effect of the market for corporate control. Lastly, it goes on to propose the several ways in which the existing formulation of the MBR could be improved by drawing on the experience of jurisdictions that have similarly experimented with the concept.