Which of the following is NOT a valid reason for a firm to establish subsidiaries?
A)to better control risk exposure of either parent-to- subsidiary or subsidiary-to-parent.
B)to enhance the company's ability to evaluate individual performance and to create different compensation systems for a diverse set of its businesses.
C)to obfuscate financial reporting.
D)to conform with regulatory requirements specific to a particular business environment.

Question

Quizplus · Accepted Answer

Establishing subsidiaries to obfuscate financial reporting is not considered a valid or ethical reason. It implies manipulating or hiding financial information, which is against transparency and good corporate governance principles. The other options (A, B, and D) are legitimate strategic reasons for a firm to establish subsidiaries.

Which of the Following Is NOT a Valid Reason for a Firm