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At whom is the hostility directed by a takeover?
Member rating: No Rating | Words: | Submitted: Mon Jun 19 2006
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Problem 1. On power within the company According to corporate finance theorists, the objective of the firm should be to maximize value or wealth. This means for stockholders to maximize stock prices. By focusing on maximizing stockholder wealth, the firm exposes itself to the risk that managers, who are hired to operate the firm for stockholders, may have their own objectives. This can lead to conflicts between both parties. Stockholders have the power to discipline and replace managers who do not attempt to maximize their wealth. For managers there are several techniques to protect themselves for these actions. In other words: stock price maximization is the most important goal of most corporations. Stockholders own the firm and elect the board of directors, who then appoint the management team. Management is supposed to operate in the best interests of the stockholders. We know, however, that because the stock of most large firms is...
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