In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by groups who are more aligned with stockholder interests. True/false

Question

Arnav Lozano

Business

10 July, 05:07

In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by groups who are more aligned with stockholder interests. True/false

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Answers (1)

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Sammy Ferrell · Answer 1

True

Explanation:

Suppose I am the CEO of the company and I am selling the Assets of the company which are the backbone of our company. I did this because I am of the opinion that I must increase the profit of the company in the short run and have compromised future incomes coming from that asset. And now suppose the asset sold was bought by one of our greatest competitor. Now we had sold him our key to success so what we learnt is that we can not assume a better future of the company without taking long term projects which will add great value to the operations, customers, shareholders and to the company.