Blanaid Clarke


In an ever-changing legal and economic environment, it is incumbent on us to subject all such premises to scrutiny in order to consider their continued application. This Article considers the effect of the MCC on the management of Irish credit institutions in the run-up to the financial crisis. Part II sets the background by explaining how the MCC has become an integral part of takeover regulation in Europe. The weaknesses in the efficient market hypothesis, which underlie the MCC and are summarized in Part III, appear not to have undermined the theory’s credibility in the minds of public policy makers in Europe. Part IV explains the background of the financial crisis in Ireland, and Part V considers the effect of the MCC on management of Irish credit institutions in the runup to this crisis. A number of reports on the causes of the crisis in Ireland have identified corporate governance failures and, in particular, poor risk management and inappropriate remuneration structures in the years leading up to the crisis. These findings are consistent with similar studies of the financial crisis commissioned in other jurisdictions across the world. A concern is that this mismanagement does not appear to have been reflected in reduced share prices as the MCC would have predicted. In fact, the opposite occurred—share prices in credit institutions soared. This Article argues not only that the MCC did not have the anticipated disciplinary effect on management, but also that it may have had the opposite effect. It appears as if certain boards may have acted recklessly in order to maintain share prices to stave off takeover bids.