A comparative study from the path dependency theory: understanding China's takeover regulations

In comparative governance research, “the end of history” theme has pointed to the convergence of, inter alia, ideology, polity, and economic systems across the world. A similar proclamation has been advocated as “the end of corporate law” in the comparative corporate governance field. Nevertheless, the law of the takeover market, an essential part of external corporate governance, has a documented feature of regulatory heterogeneity among developed economies, such as the United Kingdom and the United States. This thesis contributes the comparative governance research by expanding the comparative takeover law analysis into one of the major emerging markets. This research serves a two-fold purpose. The first purpose is to investigate the state of the art: the features of the pattern of the takeover regulatory regime in China, as compared to two other economics, the UK and US; the second purpose is to identify the underlying forces contributing to the multiple equilibria of regulatory regimes over takeover markets. To achieve these purposes, the author applies an enhanced theory of path dependency as the analytical framework, which reconciles the legal origins literature and the political economy literature. The enhanced theory of path dependency includes three fundamental elements: the existence of multiple equilibria of takeover regulations, sensitive dependence on original legal conditions, and reinforcing effects by political economy constraints. Structured along with these elements, this thesis advances three main arguments: 1. Multiple equilibria: law and regulations have presented heterogeneous regulatory patterns in takeover markets of China, the UK and the US. 2. Initial conditions: heterogeneous regulatory regimes are dependent on the origins of the general legal system and corporate regulations in each country. 3. Reinforcing mechanisms: the regulatory heterogeneity contingent upon initial conditions is entrenched by each country’s unique political economy constraints. As a conclusion, this thesis confirms the path dependent development in one of the key fields of comparative corporate governance. The conclusion of the convergence or divergence debate is inconclusive; a clearer answer is feasible for the particular area under examination. Comparative takeover law provides an example of the anti-convergent, if not divergent, phenomenon within comparative governance research. This research also projects that the enhanced path dependency theory can be a useful analytical framework for other fields of law and development research.