corporate control

corporate control

the ability to exercise control over a public JOINT-STOCK COMPANY. In countries where shares in a large company are freely traded, if the incumbent directors and senior managers fail to achieve good profit and dividend performance, the price of the company's shares will fall, making it possible for managers of another company to buy a majority of shares in the underperforming company and to gain control of it. This market for corporate control can exercise a restraining effect upon incumbent managers of a firm who are aware that they can lose their jobs if their company underperforms to the extent of provoking a takeover bid by other managers who feel that they can run the company more profitably See CORPORATE GOVERNANCE, TAKEOVER, PRINCIPAL-AGENT THEORY, DIVORCE OF OWNERSHIP FROM CONTROL.
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