The Law and Economics of Hostile Takeovers: Shareholder Wealth vs. Long-Term Corporate Health

Abstract

Hostile takeovers have long been a controversial topic in the field of corporate governance, reflecting the tension between shareholder wealth maximization and long-term corporate health. With the global integration of capital markets, hostile takeovers have become an important mechanism for restructuring corporate ownership and optimizing resource allocation, but they also trigger fierce debates about their economic effects and legal regulation. This paper systematically explores the legal and economic dimensions of hostile takeovers, focusing on the trade-off between short-term shareholder wealth gains and the sustainability of corporate long-term development. Through analyzing the economic motivation behind hostile takeovers, the impact on shareholder interests and corporate long-term value, as well as the legal regulatory frameworks in different countries, the research finds that hostile takeovers have a dual nature: they can restrain managerial inefficiency and improve resource allocation efficiency, but they may also induce short-termism, damage corporate innovation capacity, and undermine stakeholder interests. Finally, the paper puts forward suggestions for constructing a balanced legal and regulatory system that promotes market efficiency while safeguarding long-term corporate health, so as to realize the coordinated development of shareholder wealth and corporate sustainability.