The "Bootstrap Game" May Mislead Investors Regarding the Prospects for a Merged

question 65

Multiple Choice

The "Bootstrap Game" may mislead investors regarding the prospects for a merged firm. How are investors potentially misled?

• A)The firm's management generates cost savings via temporary layoffs of highly paid executives.
• B)The firm gains intellectual property in a merger but then divests the operations of the target firm.
• C)The firm's management changes the name of an acquired firm to feign diversification.
• D)The firm acquires a target with low a P/E ratio, which generates short-term earnings per share growth without any true economic advantage.

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