Q 1 Large European conglomerates have been selling subsidiaries in recent years. Name one reason that could...

Q 1 Large European conglomerates have been selling subsidiaries in recent years. Name one reason that could explain this trend:

Q2 Why is it difficult to draw conclusions on the diversification discount? Name one reason

Solutions

Expert Solution

Answers-

Q 1)

The reasons that the Large European conglomerates have been selling the subsidiaries in recent years is that there has been decrease in overall demand due to weak economic growth.

The other reason for the selling of subsidiaries in the recent time by large conglomerates because of mounting debt of some subsidiaries that and denting the overall balance sheet of the company as a whole and are not adding value.
The other reason being some large conglomerates are reducing the overall debt in the balance sheet by selling the non-profitable subsidiaries or the loss making subsidiaries.

Q 2)

The difficulty in drawing conclusions from diversification discount is because the it is difficult to identify the external sources of variation that results from diversification across firms.

The global diversification may be associated with valuation discounts or valuation premiums but it is difficult to draw infererences about the effects of diversification on corporate valuations.

The decision of the firms is internally determined and the failure to control firm characteristics and the performance of firm is likely to cause spurious divdersification discount but it is difficult to conclude the main cause of diversification discount and it remains elusive.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

The European economies have been struggling (low output growth rate) in recent years. Many economists argued...

The European economies have been struggling (low output growth rate) in recent years. Many economists argued that the creation of the Monetary Union (i.e., the Euro) was going to be a mistake. Explain how economists came to this conclusion. What do you think Europe could have done differently to avoid its current difficulties?

In recent years, we have seen many European nations join together and create the European Central...

In recent years, we have seen many European nations join together and create the European Central Bank. It was created to utilize one form of currency for many nations, thus creating stability for this currency. As the globalization of all economic activity continues at a rapid pace, is the world ready for a unified global currency common unit? Or do you feel that the world should continue to use multiple currencies? Explain.

One of the reasons health care costs have been rising rapidly in recent years is the...

One of the reasons health care costs have been rising rapidly in recent years is the increasing cost of malpractice insurance for physicians. Also, fear of being sued causes doctors to run more precautionary tests (possibly unnecessary) just to make sure they are not guilty of missing something. These precautionary tests also add to health care costs. The date provided below can be used to estimate the proportion of physicians over the age of 55 who have been sued at...

One of the reasons health care costs have been rising rapidly in recent years is the...

One of the reasons health care costs have been rising rapidly in recent years is the increasing cost of malpractice insurance for physicians. Also, fear of being sued causes doctors to run more precautionary tests (possibly unnecessary) just to make sure they are not guilty of missing something. These precautionary tests also add to health care costs. Data in the Excel Online file provided below are consistent with findings in the Reader's Digest article and can be used to estimate...

All of you have been on teams in recent years. It might have been a sports...

All of you have been on teams in recent years. It might have been a sports team or a work group. It might have been a student panel or a fraternity or sorority team. It might have been a committee of some sorts -- anything where you had to work with other people to accomplish a goal. Reflect what being on the team was like.Was it a good experience or a bad experience? Did the team work well together? If...

Unemployment rates have been higher in many European countries in recent decades than in the United...

Unemployment rates have been higher in many European countries in recent decades than in the United States. Is the main reason for this long-term difference in unemployment rates more likely to be cyclical unemployment or the natural rate of unemployment? Explain briefly

Unemployment rates have been higher in many European countries in recent decades than in the United...

Unemployment rates have been higher in many European countries in recent decades than in the United States. At the same time, the unemployment rates differ among different countries in the Euro Area. Explain what are the main reasons for this difference in unemployment rates between Europe and the United States, and among European countries?

In recent years there have been a number of major corporate collapses that have led to...

In recent years there have been a number of major corporate collapses that have led to criticism of the accounting profession. To what extent has the accounting profession been at fault in these situations? Explain. To what extent have other factors contributed? In your discussion refer to ethical issues.

Minimum wage has been a hot topic in recent years. How could increases to the federal...

Minimum wage has been a hot topic in recent years. How could increases to the federal minimum wage level effect unemployment? Using macroeconomic theory, offer a valid argument as to why the federal minimum wage rate should increase or remain relatively low as it has been for years.

Consider a recent patient care scenario and describe how it could have been managed at a...

Consider a recent patient care scenario and describe how it could have been managed at a distance. • What training would be needed? • What equipment would be used? • How would the patient and his or her family respond to home tele-monitoring?

Subjects