High levels of unrelated diversification will have a positive effect on a firm's long-term performance if managers focus on financial controls.

Question

Quizplus · Accepted Answer

High levels of unrelated diversification often lead to a lack of focus and the risk of poor coordination among business units, which can negatively impact a firm's long-term performance, even if financial controls are in place. Instead, a moderate level of related diversification is often recommended, where businesses share some commonalities and can benefit from synergies.

High Levels of Unrelated Diversification Will Have a Positive Effect