Takeover Threats and Managerial Myopia
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.
|Date of creation:||1988|
|Publication status:||Published in Journal of Political Economy -Chicago-|
|Contact details of provider:|| Postal: Littauer Center, Cambridge, MA 02138|
Web page: http://www.economics.harvard.edu/
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