Which of the following statements is FALSE?
A) An active takeover market is part of the system through which the threat of dismissal is maintained.
B) When internal governance systems such as ownership, compensation, board oversight, and shareholder activism fail, the one remaining way to remove poorly performing managers is by mounting a hostile takeover.
C) Likely because hostile takeovers and internal governance systems are substitute mechanisms, researchers have found that boards are less likely to fire managers for poor performance during active takeover markets than they are during lulls in takeover activity.
D) The effectiveness of the corporate governance structure of a firm depends on how well protected its managers are from removal in a hostile takeover.
Answer: C
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A U.S.-based multinational corporation (MNC) currently has an investment portfolio that includes
Japanese securities valued at 10,000,000 yen. The company also owes its Japanese suppliers 12,000,000 yen. Which of the following statements is MOST correct? A) The MNC will be exposed to exchange rate losses if the yen increases in value relative to the dollar. B) The MNC will be exposed to exchange rate losses if the yen declines in value relative to the dollar. C) The MNC is not exposed to exchange rate risk because it holds both assets and liabilities denominated in yen. D) The MNC can avoid exchange rate risk by paying its Japanese liabilities with dollars.