Explain How Option Pricing Theory Can Be Used to Argue

question 28

Essay

Explain how option pricing theory can be used to argue that acquisitive firms pursuing conglomerate mergers are not acting in the shareholders' best interest.

---

Definitions:

Power

The ability or capacity to direct or influence the behavior of others or the course of events.

Value System

A set of consistent ethics, principles, and morals that guide an individual's or group's behavior and decisions.

Perpetuate

To make something continue indefinitely; to cause to last or to be remembered or celebrated for a long time.

Diffusion

The process by which an innovation is communicated through certain channels over time among the members of a social system.