The Place of Shareholder Activism by Institutional Investors in Georgian System of Corporate Governance and Its Influence on International Merger Transactions
Keywords:
Shareholder Activism, Convergence of Corporate Governance, Foreign Institutional Investors, International Mergers and Acquisitions, Hedge Funds, Merger Arbitrage, Appraisal Activism.Abstract
Institutional investors, in the course of the international mergers and acquisitions deals, play the particular role and the function. Increase of the role of institutional investors has been entailed with establishment of shareholder activism as the efficient mechanism for improvement of the corporate governance. The activist, by means of consideration of the nature and the forms of the types of the shareholders and the activism thereof, strives to define the feasibility of establishment of shareholder activism practice in Georgian companies and to demonstrate the interdependence between the institutional shareholder activism and the effective protection of the rights of minority shareholders. The article outlines the basics forming due pre-conditions for development of shareholder activism, which serves as a real opportunity for institutional shareholder activism to become the integral part of Georgian system of corporate governance. The role of the institutional investors, especially of the foreign institutional investors is manifested in exercise of the facilitative function, which in its turn makes the convergence of the corporate governance achievable. Alternative investment funds, through arbitrage transactions and activism related with appraisal of the stock shares, which have already become the integral parts of their investment strategy, facilitate to increase of the transaction price and fair valuation of the shares appurtenant to the minority shareholders. The institutional shareholder activism, based on the surveys, facilitates to extension of the rights of the minority shareholders and effective realization thereof.
References
საქართველოს კანონი საინვესტიციო ფონდების შესახებ 24/07/2013
საქართველოს კანონი ფასიანი ქაღალდების ბაზრის შესახებ 24/12/1998
17 CFR 240.14a-8 - Shareholder proposals.
Directive 2007/36/EC on the Exercise of Certain Rights of Shareholders in Listed Companies, O.J. L 184, 14.7.2007, 17-24.
Anabtawi I., Stout L., Fiduciary Duties for Activist Shareholders, Stanf. L. Rev., Vol. 60, Iss. 5, 2008, 1260.
Admati A. R. Pfl eiderer P., The “Wall Street Walk” and Shareholder Activism: Exit as a Form of Voice, The Review of Financial Studies, Vol. 22, Iss. 7, 2009, 2650.
Armour J., Cheffi ns B. R., The Rise and Fall (?) of Shareholder Activism by Hedge Funds, ECGI Working Paper №136/2009, 2009, 2.
Armour J., Skeel D., Who Writes the Rules for Hostile Takeovers, and Why? The Peculiar Divergence of U.S. and U.K. Takeover Regulation, Geo.L.J. Vol. 95, 2007, 1727.
Bainbridge S., The New Corporate Governance in Theory and Practice, Oxford UP., Oxford, 2008, 22.
Bebchuk L., Brav A., Jiang W., The Long-Term Effects of Hedge Fund Activism, Colum. L. Rev., Vol. 115, Iss. 5, 2015, 1085-1156.
Black B., Protecting the Retail Investor in an Age of Financial Uncertainty, U. Dayton L. Rev., Vol. 35, 2009, 64.
Briggs Th., Corporate Governance and the New Hedge Fund Activism: An Empirical Analysis, J. Corp. L., Vol. 32, Iss. 4, 2007, 693.
Bragg S., Mergers & Acquisitions A Condensed Practitioner’s Guide, Wiley, Hoboken, 2009, 53.
Brown R., Mergers, Acquisitions and Divestitures, Palgrave Macmillan, New York, 2007, 71-72.
Burch E., Optimal Lead Plaintiffs, Vand. L. Rev., Vol. 64, 2011, 1115.
Cahn A., Donald D., Comparative Company Law, Cambridge UP., Cambridge, 2010, 799.
Cheffi ns B.R., Armour J., The Past, Present, and Future of Shareholder Activism by Hedge Funds, J. Corp. L., Vol. 37, Iss. 1, 2011, 58.
Chiu I., The Foundations and Anatomy of Shareholder Activism, Oxford, 2010, 3.
Chiu I., Institutional Shareholders as Stewards: Toward a New Conception of Corporate Governance, Brook. J. Corp. Fin. & Com. L. Vol. 6, 2012, 387-432.
Cheffins B.R., Armour J., The Past, Present, and Future of Shareholder Activism by Hedge Funds, J. Corp. L., Vol. 37, Iss. 1, 2011, 57-58.
Coffee J., Future as History: The Prospects for Global Convergence in Corporate Governance and Its Implications, Nw. U. L. Rev., Vol. 93, Iss. 3, 1998-1999, 643.
Choi S., Silberman L., Transnational Litigation and Global Securities Class Action Lawsuits, Wisc. L. Rev., Vol. 2009, 479.
Choi S., Fisch J., On Beyond CalPERS: Survey Evidence on the Developing Role of Public Pension Funds in Corporate Governance, Vand. L. Rev., Vol. 61, 2008, 316.
Depamphilis D., Mergers, Acquisitions and Other Restructuring Activities, 6th ed., Elsevier, New York, 2012, 29, 181.
Dent G., A Defense of Proxy Advisors, Mich. St. L.Rev., Vol. 2014, Iss. 5, 2014, 1290.
Gaughan P., Mergers, Acquisitions and Corporate Restructurings, 5th ed., Wiley, New York, 2011, 273.
Geczy Ch., Jeffers J., Musto D., Tucker A., Institutional Investing When Shareholders Are Not Supreme, Harv. Bus. L. Rev., Vol. 5, Iss. 1, 2015, 75.
Gillan S.L., Starks L.T., The Evolution of Shareholder Activism in the United States, Journal of Applied Corporate Finance, Vol. 19, Iss. 1, 2007, 51.
Gevurtz F., The Globalization of Corporate Law: The End of History or a Never-Ending Story, Wash. L. Rev., Vol. 86, Iss. 3, 2011, 475-521.
Gillan S.L., Starks L.T., The Evolution of Shareholder Activism in the United States, Journal of Applied Corporate Finance, Vol. 19, Iss. 1, 2007, 58.
Gulinello Ch., The Retail Investor Vote: Mobilizing Rationally Apathetic Shareholders to Preserve or Challenge the Board’s Presumption of Authority, Utah L. Rev., Vol. 2010, Iss. 3, 2010, 547-604.
Haan S., Voter Primacy, Fordham L. Rev., Vol. 83, Iss. 5, 2015, 2655.
Harris L., Missing in Activism: Retail Investor Absence in Corporate Elections, Colum. Bus. L. Rev., Vol. 104, Iss. 1, 2010, 104-204.
Hawley J., Kamath J., Williams A., Corporate Governance Failures: The Role of Institutional Investors in the Global Financial Crisis, Penn UP, Philadelphia, 2011, 14.
Holber Th., Full of Hot Air? Evaluating the Airgas Court’s Reservations about Shareholders’ Short- Term and Long-Term Interests in Takeovers, Fordham J. Corp. & Fin. L., Vol. 18. Iss. 1, 2012, 134.
Hu h. Black B., The New Vote Buying: Empty Voting and Hidden (Morphable) Ownership, S. Cal. L. Rev., Vol. 79, 2006, 811-908.
Kahan M., Rock B., Hedge Fund Activism in the Enforcement of Bondholder Rights, NW. L. Rev., Vol. 103, 2009, 282, 1028, 1040, 1047, 1069.
Katelouzou D., Worldwide Hedge Fund Activism: Dimensions and Legal Determinants, J. Bus. L., Vol 17, Iss. 3, 2015, 791, 797
Katelouzou D., Myths and Realities of Hedge Fund Activism: Some Empirical Evidence, Va. L. & Bus. Rev., Vol. 7, 2013, 459-504.
Kirchner Th., Merger Arbitrage: How to Profit from Event-Driven Arbitrage, Wiley, Hoboken, 2009, 108-112.
Korsmo Ch., Myers M., Appraisal Arbitrage and the Future of Public Company M&A, Brooklyn Law School, Legal Studies Research Paper №388, 2014, 3. <http://ssrn.com/abstract=2424935>
[16.06.2015].
Krishnamurti Ch., Mergers, Acquisitions and Corporate Restructuring, Response, London, 2008, 187.
Langevoort D., The SEC, Retail Investors, and the Institutionalization of the Securities Markets, Va. L. Rev., Vol. 95, Iss. 4, 2009, 1025-1083.
Low Ch .K., A Road Map for Corporate Governance in East Asia, Nw. J. Int’l L. & Bus., Vol. 25, Iss. 1, 2004, 185-186.
Magnuson W., Takeover Regulation in the United States and Europe: An Institutional Approach, Pace Int’l L. Rev., Vol. 21, 2009, 231.
Macey J., Corporate Governance: Promises Kept, Promises Broken, Princeton UP, Princeton, 2008, 272.
Masouros P., Is the EU Taking Shareholder Rights Seriously?: An Essay on the Impotence of Shareholdership in Corporate Europe, European Company Law, Vol. 7, Iss. 5, 2010, 200.
Masourous P., Is the EU Taking Shareholder Rights Seriously?: An Essay on the Impotence of Shareholdership in Corporate Europe, European Company Law, Vol. 7, 2010, 201.
Nili Y., Missing the Forest for the Trees: A New Approach to Shareholder Activism, Harvard Bus. L. Rev., Vol. 4, 2014, 167.
Papadima R., Appraisal Activism in M&A Deals: Recent Developments in the United States and the EU, European Company Law, Vol. 12, Iss. 4, 2015, 188-198.
Perino M., Institutional Activism through Litigation: An Empirical Analysis of Public Pension Fund Participation in Securities Class Actions, J. Empir. Leg. Stud., Vol. 9, 2012, 368.
Rock E., Shareholder Eugenics in the Public Corporation, Cornell L. Rev., Vol. 97, 2012, 856.
Romano R., Less is More: Making Institutional Investor Activism A Valuable Mechanism of Corporate Governance, Yale Journal on Regulation, Vol. 18, Iss. 2, 2001, 174-252.
Rose P., Shareholder Proposals in the Market for Corporate Infl uence, Florida L. Rev., Vol. 66,
2014, 2179-2228.
Rose P., Sharfman B., Shareholder Activism as a Corrective Mechanism in Corporate Governance, BYU L. Rev., Vol. 2014, Iss. 2, 2014, 101-135. ix. <http://ssrn.com/abstract=2324151> [07.12.2014].
Santella P., Baffi E., Drago C., Lattuca D., Legal Obstacles to Institutional Investor Activism in the EU and in the US, Eur. Bus. L. Rev., Vol. 23, Iss. 2, 2012, 257–307.
Sharfman B., A Theory of Shareholder Activism and its Place in Corporate Law, Tenn. L. Rev., Vol. 82, Iss. 4, 2015, 101-134.
Sharfman B., Activist Hedge Funds in a World of Board Independence: Creators or Destroyers
of Long-Term Value? Columbia Business Law Review, Forthcoming. <http://ssrn.com/abstract=2576408>. [24.03.2015].
Stout L. A., Derivatives and the Legal Origin of the 2008 Credit Crisis, Harv. Bus. L. Rev., Vol.
1, 2011, 1-38.
Shadab H., The Law and Economics of Hedge Funds: Financial Innovation and Investor Protection, Berkeley Bus. L. J., Vol. 6, 2009, 260.
Silver Ch., Dinkin S., Incentivizing Institutional Investors to Serve as Lead Plaintiffs in Securities Fraud Class Actions, DePaul L. Rev., Vol. 57, Iss. 2, 2008, 471.
Sherman A., Hart M., Mergers & Acquisitions from A to Z, 2nd ed., Amacom, N. Y. 2006, 143-146.
Stowell D., An Introduction to Investment Banks, Hedge Funds, and Private Equity: The New Paradigm, Elsevier, London, 2010, 229.
Thomas R., The Evolving Role of Institutional Investors in Corporate Governance and Corporate Litigation, Vand. L. Rev. Vol. 61, 2008, 300-301.
Webber D., Private Policing of Mergers and Acquisitions: An Empirical Assessment of Institutional Lead Plaintiffs in Transactional Class and Derivative Actions, Del. J. Corp. L., Vol. 38, Iss. 3, 2014, 907.
Webber D., The Plight of the Individual Investor in Securities Class Actions, Nw. U. L. Rev., Vol. 106, Iss. 1, 2012, 180.
Wynkoop N., The Unregulables? The Perilous Confl uence of Hedge Funds and Credit Derivatives, Fordham L. Rev. Vol. 76, Iss. 6, 2008, 3096.
Zanoni A., Hedge Funds’ Empty Voting in Mergers and Acquisitions: A Fiduciary Duties Perspective, Global Jurist, Vol. 9, Iss. 4, 2009, 41-79.
Çelik S., Isaksson M., Institutional Investors as Owners: Who Are They and What Do They Do?, OECD Corporate Governance Working Papers, №.11, OECD Publishing, 2013, 8, <http://dx.doi.org/10.1787/5k3v1dvmfk42-en>, [16.09.2015].
<http://www.ecgi.org/activism/index.php>. [28.04.2015].
In re Appraisal of Dole Food Company, Inc., №9079-VCL. (Del. Ch. Augt 27, 2015).
In re Appraisal of Transkaryotic Therapies, Inc., C.A. №1554-CC (Del. Ch. May 2, 2007).
