Question

Since a manager's central goal is to maximize the firm's stock price, any merger offer that provides stockholders with significant gains over the current stock price will be approved by the current management team.

a) true
b) false

Answer 1

b) false

Step-by-step explanation:

Sometimes conflicts arise between the interests of upper management and the interests of the stockholders. E.g. if upper management believes that they will lose their very well paid jobs if a merger occurs, then they will definitely oppose it. Some people call this an agency problem because the agent (the board of directors and upper management) have conflicting interests with the principals (stockholders).