Since stockholders are able to reduce their exposure to risk by efficiently diversifying their holdings of securities,there is no reason for individual firms to seek diversification of their holdings of assets.

Question

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Even though stockholders can diversify their holdings of securities, individual firms may still seek diversification of their asset holdings in order to reduce their own risks and uncertainties. This is particularly important when the firm operates in a volatile industry or in unstable economic conditions. Diversification can help the firm mitigate the effects of adverse events and ensure stable long-term growth.

Since Stockholders Are Able to Reduce Their Exposure to Risk