Dr. Rasha Radwan Abdelhay
Assistant Professor – Faculty of Law – Lebanon University

Abstract:

The need for corporate governance has emerged to control the administrative mechanisms of both companies and financial markets. This can be achieved through a set of rules and principles that limit, as much as possible, the aberrant practices that might be committed by the administration. This can also determine the ethical principles of healthy practices, maintain the rights of shareholders, ascertain justice among them, increase trust in the performance of financial markets and offer a remedy for the insufficiency of their transactions. Hence, it is necessary to endeavor to find a set of standards and ethical and professional considerations that enhance trust and credibility in the information offered by companies.
The financial economic crisis has imposed further limitations on financial markets because many companies have fallen into financial difficulties due to faulty investment policies. Therefore, it should be clear that corporate governance is a financial necessity in both the private and public sectors, because it is through it that all financial processes applied by companies are clearly revealed. The most important of these processes are mergers and acquisitions, which are considered to be the biggest financial operations in the financial markets. This causes repercussions at the local as well as the international levels and ultimately leads to what is called integrated social economic development.
Due to the novelty of this issue in the financial markets, Arabic legislation has not been adopted in this area until very recently, as opposed to the rapid development in Western countries. This is particularly noticeable in the American and European laws, that are characterized by modernity and innovation, to meet the requirements of the financial life and to find effective solutions that guarantee development and expansion. Mergers and acquisitions are thus considered as the foundation of the financial life and the commercial activities that activate financial markets.
There is a need to create large entities that are capable of competing in a search for development and gains. Taking account of the increase on the influxes of capital through the national borders of various countries and the increase of the level of globalized investments that are searching for higher revenues, mergers and acquisitions have became commonplace in the world of business.
It is worth noting that even though mergers are a tool used by companies to expand their operational transactions and they aim in many cases at increasing their profits in the long term, the completion of the merger does not guarantee the success of the new company. The merger may result in a net loss of the worth of this company due to problems either in the techniques and equipment or in the culture of the company. Furthermore, these problems may become worse if there is lack of sufficient research or suitability or relevance or if one of the partner companies hides its losses or commitments. On the other hand, strong companies might resort to acquire competitive companies exhausted by the shrinking credit markets. Moreover, in every sector there may be a large number of companies that are susceptible to acquisition that will benefit from the property shares and from the strong credit situations.
Henceforth, there should be strategies in place that take into account all of the positive and negative factors that relate to mergers and acquisitions in an ambience of transparency that guarantees the rights of the shareholders. This cannot be achieved unless there are laws and clear, detailed rules that foster these transactions. In other words, this can be achieved at the level of corporate governance that is internationally adopted and that complements local and national laws.

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