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:

Replacement Chart

A visual tool used in succession planning to identify potential candidates for future vacancies within an organization.

Promotable Now

A term used to describe an employee who is currently ready or eligible to move up to a higher position within an organization.

Replacement Planning

A process in HR management that identifies and develops internal candidates to fill key positions within the organization in case they become vacant.

Succession Management

Strategic planning to identify and develop individuals within an organization to fill key leadership positions in the future.