Empirical evidence on takeovers reveals that:
A)takeovers do not benefit shareholders of target companies.
B)actions by managers to prevent offers are most likely to be harmful to shareholders.
C)takeover gains result from the creation of monopoly power.
D)acquiring company shareholders earn significant losses.

Question

Quizplus · Accepted Answer

Empirical evidence suggests that managers' actions to prevent takeovers, such as poison pills and golden parachutes, are more likely to harm shareholders of the target company by depriving them of potentially higher stock prices. In contrast, takeovers have been found to benefit acquiring company shareholders and may also result in long-term gains for target company shareholders if the new management is able to improve operations and profitability. However, takeovers may not always be beneficial and their success depends on factors such as the strategic fit of the companies and the acquisition price. The statement in option A is not entirely true, as some studies have found positive short-term and long-term effects for target company shareholders. Option C is not generally applicable as the creation of monopoly power may not be the primary motive or outcome of all takeovers. Option D is also incorrect, as acquiring company shareholders may benefit from synergies or growth opportunities resulting from the acquisition.

Empirical Evidence on Takeovers Reveals That