Which of the Following Statements Regarding Mergers and Diversification Is

question 18

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 be reduced 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:

Apprenticeship Setting

A learning environment where a novice gains knowledge and skills in a particular trade or profession through direct instruction and hands-on experience under the guidance of an experienced mentor.

Formal Education Settings

Institutions or environments like schools and universities where structured and standardized educational programs are provided.

Motivation

The internal and external factors that stimulate people to take actions that lead to achieving a goal.

Dysgraphia

A neurological disorder characterized by impaired handwriting and/or spelling abilities, not associated with intellectual impairments.