Date of Award

11-2020

Document Type

Dissertation

Degree Name

Doctor of Juridical Science (SJD)

Abstract

For many nations across the globe, especially the US and the UK, market for corporate control is a paradigm of policy agenda. This is a significant concept in of economics, finance, and law. Nevertheless, it remains a course of contention even though its merits and demerits have been extensively explored by numerous scholars. Among the various functions of market for corporate control, two stands out. First it is an external governance mechanism that provides a legal platform to discipline insiders. Secondly it has economic significance in ensuring optimal use of resources through assigning and promoting their use. Overlapping of interests, which is a dilemma for many legal policymakers, cuts across a wide array of spectra from creditors and suppliers to controlling and non-controlling shareholders. Consequently, balancing between these interests and creating relevant and strong authorities to enable the implementation of a takeover regime has proved an uphill task. Despite several background similarities in corporate culture between the UK and the US, including philosophical values and ownership structures, the regulation of corporate controls varies significantly in these countries. In the UK, the model is codified and systematic and the courts are impartial. Equality is a priority and the board of directors cannot adopt defense measures in the UK. In contrast, the American model is based on Delaware laws and heavily relies on the courts. Equality is not a priority and shareholders are subject to the market rule and fiduciary duties.

Many emerging economies have adopted the British takeover mode. A classic example is Saudi Arabia where merger and acquisition regulations are heavily borrowed from the UK model. The Kingdom of Saudi Arabia’s Takeover and Mergers Code bears striking resemblance to the UK model. This paper addresses the concerns as to what extent the transplanting of regulations among nations is efficient and various variations of ownership structures. In the KSA, ownership structure is dominantly governmental and family ownership. In the UK it is extensively diffused ownership. Another concern is based on the competency and reliability of financial institutions and legal structures. The requirement of equality among shareholders is paramount especially in the context of a control shift. The increased costs can be unfavorable to upcoming bidders while incontestability can bring rigidity in control. Inevitably, resource allocation mechanisms will be impaired as controllers and managers are shielded from challenge. Therefore, the KSA corporate control model should be supplemented by the Contractual Model. It is hoped the KSA model will enhance corporate control contestability and eliminate the rigidity under the current Model. In addition, the model caters for the interests of noncontrolling investors against risky deals. However, the implementation of the proposed Model relies on efficient financial and legal institutions, hence the need for reforms. This is the first time the Saudi corporate control market has been examined based on legal and cultural institutions, norms, and the Islamic laws. To ensure that listed firms’ control assets are highly tradable, the adoption of the Takeover market regime by the Saudi policymakers should be non-negotiable. This will enable a seamless transformation of the Saudi economy to a capitalist market with an emphasis on privatization programs in line with the country’s vision 2030.

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