The Risk for Firms That Follow the Unrelated Diversification Strategy

question 81

Multiple Choice

The risk for firms that follow the unrelated diversification strategy in developed economies is that:

• A) external investors tend to dump the stocks of conglomerates during economic downturns.
• B) conglomerates are typically owned by one powerful entrepreneur and do not survive his/her retirement or death.
• C) government regulations, especially in Europe, have periodically forced the dissolution of conglomerates.
• D) competitors can imitate financial economies more easily than they imitate economies of scope.

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Definitions:

ANOVA

Analysis of Variance, a statistical method used to compare the means of three or more samples to determine if at least one of the sample means is significantly different from the others.

Degrees of Freedom

The number of independent values or quantities which can be assigned to a statistical distribution, used to estimate a population parameter.

Critical Value

A point on a statistical distribution that is compared with the test statistic to determine whether to reject the null hypothesis.

Test Statistic

A numerical value calculated from sample data, used in hypothesis testing to determine whether to reject the null hypothesis.