The main check on managerial desires to over-diversify the firm is/are the
A) external capital markets.
B) internal capital market.
C) shareholders.
D) board of directors.

Question

Quizplus · Accepted Answer

The board of directors is the best check on managerial desires to over-diversify the firm. The board is responsible for overseeing the management team and ensuring that they are acting in the best interests of the company and its shareholders. The board can exercise its power to limit the scope of diversification by approving or rejecting the management team's diversification plans. Additionally, the board can also remove the management team if they are not acting in the best interests of the company. The other options (external capital markets, internal capital market, and shareholders) may also have some influence, but the board of directors is the most effective check on managerial over-diversification.

The Main Check on Managerial Desires to Over-Diversify the Firm