... Therefore managers run the risk of being removed from their jobs, either by the firm's board of directors or by outside forces. Hostile takeovers (when management does not want the firm to be taken over) are most likely to occur when a firm's stock is undervalued relative to its potential because of poor management. In a hostile takeover, the managers of the acquired firm are generally fired, and any who are able to stay on, lose the autonomy they had prior to the acquisition. A potential agency conflict arises whenever the manager of a firm owns less than a substantial percentage of the firm's common stock. In most large corporations, agency conflicts are quite important, because large firms' managers generally own only a small percentage of the stock. Questions: At whom is the hostility directed by a takeover? The hostilility is directed to the management of the company. Because the stockholders want to have ...

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