The Poison Pill in Japan: The Missing Infrastructure

The coming of hostile takeovers to Japan has been anticipated, and anticipated, and anticipated. Each report of a reduction in the size of crossholdings among Japanese companies and in the size of Japanese bank stockholdings in their clients has given rise to an expectation that now, at last, hostile offers would emerge. It is not surprising that commentators looked forward, optimistically, to the arrival of a potentially disruptive takeover technique. The extended Japanese recession, together with management resistance to internally implemented restructurings and the barriers to externally imposed restructurings, has created the potential for substantial private and social gain from rationalizing production. Curtis Milhaupt reports that as of 2000, thirteen percent of the Tokyo Stock Exchange nonfinancial firms traded at below their liquidation value, a phenomenon that in the United States led to a wave of bust-up hostile takeovers during the 1980s. Nonetheless, in Japan the much anticipated hostile takeovers did not materialize. In turn, the absence of takeovers resulted in little clamor for defensive tactics; without a threat on the horizon, no demand for protection developed