Stockholders like mutual funds; therefore, they will pay a premium for the shares of a ﬁrm that is a
conglomerate because the ﬁrm is essentially a mutual fund.

Question

Quizplus · Accepted Answer

Stockholders may not necessarily pay a premium for the shares of a conglomerate simply because it operates in multiple industries. The value of the conglomerate's shares depends on various factors such as its financial performance, growth prospects, management efficiency, and competitive advantage. While diversification can be an advantage for a conglomerate, it can also lead to complexities and inefficiencies that may reduce its overall appeal to investors. Therefore, it is not accurate to say that a conglomerate is essentially a mutual fund and that stockholders will pay a premium for its shares.

Stockholders Like Mutual Funds; Therefore, They Will Pay a Premium