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The Recent Corporate Hostile Takeovers In Japan

6919 words - 28 pages

Introduction序論According to corporate finance theorists, the objective of the firm should be to maximise value or wealth, which means for stockholders to maximise stock prices. By focusing on maximising stockholder wealth, the firm exposes itself to the risk that managers, who are hired to operate the firm for stockholders, may have their own objectives. Stockholders have the power to discipline and replace managers who do not attempt to maximise their wealth; however, for managers there are several techniques to protect themselves from these actions (Osano & Toshiaki, 2001).In other words, stock price maximisation is the most important goal of most corporations. Stockholders own the firm and elect the board of directors, who then appoint the management team. Management is then supposed to operate in the best interests of the stockholders. However, it is known that because the stock of most large firms is widely held, the managers of large corporations have a great deal of autonomy. This means that managers might pursue goals other than stock price maximisation. Therefore managers run the risk of being removed from their jobs, either by the firm's board of directors or by outside forces.A hostile takeover is a process that occurs when management does not want the firm to be taken over. These are most likely to occur when a firm's stock is undervalued relative to its potential because of poor management (Osano & Toshiaki, 2001). 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.A hostile takeover is generally pursued by cornering a certain company's stock on the market or via takeover bidding to publicly purchase shares in the industries on the market. An organisation whose market valuation is lower than its net asset value is more prone to become the victim of hostile takeover bids (Subramanian, 2003). This is because the potential acquirer has the opportunity to make a larger profit than the cost of the acquisition if the acquirer will be able to purchase the targeted industry and then sell its assets.Economists have said that in the Japanese market, there are few hostile takeovers, which have been conducted against some Japanese industries. Even at the dawn of this century, it was said that there is no market for corporate control in Japan, and there is not likely to be one (Fligstein, 2001). Yet in the land of friendly shareholders, expansive views of corporate purpose that go well beyond shareholder's profitisation, and enduring concern for the preservation of harmonious relationships, things have somewhat changed.Contrary to...

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