In a competitive marketplace, if managers deviate too far from making decisions that are consistent with stockholder wealth maximization, they risk being disciplined by the market. Part of this discipline involves the threat of being taken over by companies with policies that are more aligned with stockholder interests.

Question

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The statement accurately describes the potential consequences for managers who prioritize decisions that do not align with stockholder wealth maximization in a competitive marketplace. The threat of takeover by companies with more stockholder-friendly policies is a disciplinary mechanism of the stock market.

In a Competitive Marketplace, If Managers Deviate Too Far from Making