Because of the separation of ownership and control, modern corporations are run by professional managers. But, since Berle and Means (1932), the separation of ownership and control has been criticized for managers' more discretion. In general, managers' interests do not coincide with stockholders' interests and the agency problem between managers and stockholders happens. Fama and Jensen (1983) suggest that market for takeover as an external control mechanism and board as an internal control mechanism can help solve agency problems. Hostile takeovers are a powerful governance mechanism because they offer the possibility of bypassing the management to take permanent control of the company, but also disruptive and costly at the same time. Thus, the corporate governance by the board is gathering public attention dramatically.
