Investors often struggle to understand the complexity of diversified companies, and this can result in relatively poor performance by the stocks of such companies. This is known as a ________.
A) divestment discount
B) diversification discount
C) spin-off strategy
D) liquidation opportunity
E) retracement opportunity

Question

Quizplus · Accepted Answer

The term "diversification discount" refers to the phenomenon where diversified companies are valued less by the market compared to their more focused counterparts, often due to the complexity and perceived inefficiencies in managing diverse business units.

Investors Often Struggle to Understand the Complexity of Diversified Companies