Takeover Threats and Managerial Myopia
AbstractThis paper examines the familiar argument that takeover pressure can be damaging because it leads managers to sacrifice long-term interests in order to boost current profits. If stockholders are imperfectly informed, temporarily low earnings may cause the stock to become undervalued, increasing the likelihood of a takeover at an unfavorable price; hence the managerial concern with current bottom line. The magnitude of the problem depends on a variety of factors, including the attitudes and beliefs o f shareholders, the extent to which corporate raiders have inside information, and the degree to which managers are concerned with retaining control of their firms.
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Bibliographic InfoPaper provided by Harvard University Department of Economics in its series Scholarly Articles with number 3708937.
Date of creation: 1988
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Publication status: Published in Journal of Political Economy -Chicago-
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