Hostile takeover is a condition whereby one company called the acquirer, takes control over another company known as the target company contrarily to the target company’s management. In most cases, hostile takeover will lead to increase in stock price in order to meet the price agreed in the takeover bid. In addition, traders will invest on the announcement of merges by purchasing stock before price increase ( Roodposhti, Jahromi, & Kamalzadeh, 2018) . Some of the positive effects of hostile takeovers include elimination of managerial inefficiency where shareholders fail to work appropriately and the cost of controlling increase incredibly, hostile takeover will give a mechanism to do away with such unnecessary costs and correct inefficiencies by replacing the whole control system ( Khemili, & Belloumi, 2018) . Another one is the hostile takeover increases target performance. As mentioned above that hostile takeover eliminates managerial inefficiency. As a result targeted manager will work to defeat hostile bid to avoid being removed from their positions and thus there will be improvement in target’s performance and consequently increase in value of shares ( Kim, Pantzalis, & Wang, 2018) . One main negative effect of hostile takeover is that, it incentivizes short termism. It discourages managers to invest in projects that may take long time. In such cases companies may be forced to prefer short-term earning rather than profitable long term projects ( Oloyede, & Fapetu, 2018) . Thus hostile takeover is detrimental to stakeholders since it tends to force the stakeholders to work properly and effectively so as to avoid being demoted or being removed from their position of work ( Brooks, & Oikonomou, 2018) . However, it is beneficial to them in that it allows long term shareholder chose whether to sell their company or not.
References
Roodposhti, F. R., Jahromi, M. B., & Kamalzadeh, S. (2018). Portfolio selection using analytic hierarchy process and numerical taxonomy analysis: case study of Iran. American Journal of Finance and Accounting , 5 (4), 394-414.
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Khemili, H., & Belloumi, M. (2018). Cointegration Relationship between Growth, Inequality and Poverty In Tunisia. International Journal of Applied Economics, Finance and Accounting , 2 (1), 8-18.
Oloyede, J. A., & Fapetu, O. (2018). Effect of exchange rate volatility on economic growth in Nigeria (1986-2014). Afro-Asian Journal of Finance and Accounting , 8 (4), 404-412.
Kim, I., Pantzalis, C., & Wang, B. (2018). Shareholder coordination and stock price informativeness. Journal of Business Finance & Accounting , 45 (5-6), 686-713.
Brooks, C., & Oikonomou, I. (2018). The effects of environmental, social and governance disclosures and performance on firm value: A review of the literature in accounting and finance. The British Accounting Review , 50 (1), 1-15.
