Why might one expect managers to act in shareholders interest?

Management Dec 24, 2020

Expert Solution

Reasons why one might expect managers to act in shareholders' interest.

It a legal duty for a manager to function in shareholders' interest.
Managers would react in shareholders' interest to avoid being dismissed by the Board of Directors who are elected by the shareholders.
Failure of the managers to act in shareholders' interest may result in shareholders selling own shares hence lowering firms' stock. This leads to a change in the firm's top management and the board of directors

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