Hostile takeovers of corporations have been in the business news for some time now. Several states have passed laws making it harder for out-of-state corporations to acquire firms headquartered in their states. Several corporations have established “golden parachutes” to give executives high payoffs in case of hostile takeover. What market imperfection is likely to be worsened by these actions? Explain.
What will be an ideal response?
The problem of agency is likely to grow worse. Managers are less likely to increase earnings and share prices in order to make acquisition more difficult. “Golden parachutes” protect managers from failure and make acquisition more difficult.
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Which of the following is a characteristic of a firm in a perfectly competitive market?
A) The firm must lower its price in order to increase quantity demanded. B) The firm cannot make a profit in the short run because it is too small a part of the total market. C) The firm can make a profit in the long run but not in the short run. D) The firm can sell as much as it wants without having to lower its price.
List appropriate criteria for deciding whether a merger of two firms producing similar products should be permitted
Josh is a full-time college student who is not working or looking for a job. The Bureau of Labor Statistics counts Josh as
a. unemployed and in the labor force. b. unemployed but not in the labor force. c. in the labor force but not unemployed. d. neither in the labor force nor unemployed.
People consume more fresh fruit in the summer than during the rest of the year, yet the prices of fresh fruit are lower in the summer than in other seasons. What accounts for this?
A) Fresh fruit is not subject to the law of supply. B) The supply of fresh fruit increases in the summer. C) Fresh fruit is an inferior good. D) Fresh fruit is not subject to the law of demand.