Question

57. 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 manages is by mounting a hostile takeover.

C. 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 1

Ans C. 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.

Correct Statement: researchers have found that boards are more likely to fire managers for poor performance during active takeover markets than they are during lulls in takeover activity.