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Part $1$

Diversification is good for shareholders. So why$$ shouldn$$t managers acquire firms in different industries to diversify a$$ company?

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Part $1$

$($Select all of the choices that$$ apply.$)$

A$.$

Shareholders can efficiently achieve diversification on their own by purchasing shares in different companies.

B$.$

When managers achieve diversification by creating a conglomerate through purchasing other companies it is often done at a premium over market prices.

C$.$

Because it may be harder to measure performance accurately in a$$ conglomerate, agency costs may increase and resources may be inefficiently allocated across divisions. As a$$ result, it is cheaper for investors to diversify their own portfolios than to have the corporation do it through acquisition.

D$.$

While it is true that individual investors can diversify on their$$ own, it is usually more expensive than letting the two firms merge and then buying one set of shares rather than two.