Although the market for corporate control lacks the precision of internal governance mechanisms, the fear of acquisition and influence by corporate raiders is an effective constraint on managers acting in their own self interest.

Question

Quizplus · Accepted Answer

The statement is true. The fear of acquisition and influence by corporate raiders serves as a constraint on managers acting in their own self-interest in the market for corporate control. This is because corporate raiders can take over a company by acquiring a controlling share of its stock and replace the management team with their own, potentially causing the current managers to lose their jobs and/or wealth. Therefore, managers are incentivized to act in the best interests of the company's shareholders to avoid being targeted by corporate raiders.

Although the Market for Corporate Control Lacks the Precision of Internal