The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 20

Can those who own the stock of a large business corporation prevent the managers from pursuing their own interests rather than the interests of the shareholders?
(a) What happens to the price of a corporation's stock when it is managed for the benefit of the managers rather than the shareholders?
(b) What would happen to the stock price if some individual or group gained voting control over the board of directors and replaced the management with people willing and able to pursue maximum net revenue for shareholders?
(c) How do these facts create incentives for some people to invest Resources in monitoring managers' behavior?
(d) How does the prospect of what managers like to call "a hostile takeover" restrain the behavior of managers? Toward whom is a hostile takeover hostile? Toward whom is it friendly?
(e) Are those who specialize in corporate takeovers entrepreneurs?