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Takeover Threats and Managerial Myopia

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  • Stein, Jeremy C.

Abstract

This 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.

Suggested Citation

  • Stein, Jeremy C., 1988. "Takeover Threats and Managerial Myopia," Scholarly Articles 3708937, Harvard University Department of Economics.
  • Handle: RePEc:hrv:faseco:3708937
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