In trying to assure that managerial actions lead to shareholder value maximization, a risk can come about if the market value of a firm becomes less than its book value. The risk is
A)it becomes an attractive takeover target.
B)the firm will be delisted by the stock exchange.
C)the Securities and Exchange Commission will not allow it to declare dividends until the market value once again exceeds the book value.
D)the firm will be unable to service its debt.

Question

Quizplus · Accepted Answer

If the market value of the firm becomes less than the book value, a corporate raider can take over the company for a price less than the book value of the assets of the company, and would be likely to fire underperforming management.

In Trying to Assure That Managerial Actions Lead to Shareholder