Which of the Following Statements Regarding Mergers and Diversification Is

question 28

Multiple Choice

Which of the following statements regarding mergers and diversification is FALSE?

• A) Because it may be easier to measure performance accurately in a conglomerate, agency costs may reduce and resources may be more efficiently allocated.
• B) Because these employees are obligated to hold idiosyncratic risk, they benefit when the firm reduces that risk by conglomerating.
• C) Like a large portfolio, large firms bear less idiosyncratic risk, so often mergers are justified on the basis that the combined firm is less risky.
• D) Because most stockholders will already be holding a well-diversified portfolio, they get no further benefit from the firm diversifying through acquisition.

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Definitions:

Dry Summers

Characteristic of the Mediterranean climate, referring to a period of the year with minimal rainfall and high temperatures.

Sequence

refers to the order of units in a biopolymer, like DNA, RNA, or proteins, or more generally to the arrangement of events or processes.

Equator

An imaginary line around the middle of the Earth, equidistant from both poles, dividing it into the Northern and Southern Hemispheres.

Biomes

Large ecological areas on the Earth's surface, with flora and fauna adapting to their environment, such as forests, deserts, and tundras.