Which of the Following Statements Is False

question 22

Multiple Choice

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 managers is by mounting a hostile takeover.
• C) Likely 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.

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Definitions:

Long-run Equilibrium

A state in which all factors of production and outputs are variable, allowing for the adjustment of all inputs, leading to a balanced economic condition over time.

Zero Economic Profits

Occurs when a firm earns just enough revenue to cover its total costs, including opportunity costs, but no more.

Efficiently

Performing or functioning in the best possible manner with the least waste of time and effort.

Economies of Scale

The cost advantage achieved by businesses when production becomes efficient, as the scale of operation increases leading to a reduction in average costs.