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Suppose you own shares in a company. The current price per share is $25. Another company...

  1. Suppose you own shares in a company. The current price per share is $25. Another company has just announced that it wants to buy your company and will pay $35 per share to acquire all the outstanding shares. Your company’s management immediately begin fighting off this hostile bid. Is management acting in the shareholders’ best interest? Why or why not？
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No, here the management is not acting in the best interest of the shareholders, because the management is acting to prevent shareholders from maximizing their value. The bid price from the takeover is significantly higher than the current market price of the share, thus the shareholders are better off, with the increase in value of their investments, if the takeover goes ahead. Thus, management is not acting in the best interest of the shareholders.

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