Australia's Corporations Act includes the general rule that an investor cannot acquire more than 20% of the voting shares in a company without making a full takeover bid. The "takeover threshold" of 20% is significantly more onerous than the threshold of 30% maintained in the UK, Singapore and Hong Kong, three countries with highly active takeover markets. Several empirical studies based on the UK and Australian markets suggest the probable effect of a toehold increase will be to increase returns to target shareholders or, at worst, not reduce them from present levels. Greater contestability of corporate control in Australia is desirable as it promotes industry adaptability and efficiency in allocation of assets. Increasing the takeover threshold to 30% promises to deliver more certainty for potential acquirers and higher returns to target firm shareholders as they benefit from a higher incidence of takeover bids.
|Publication status||Published - 2006|