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The capital markets often view diversification attempts with suspicion because: There was a large number of unsuccessful diversification attempts in...
5. The capital markets often view diversification attempts with suspicion because:
a. There was a large number of unsuccessful diversification attempts in the past decades: it conditioned the markets to expect bad performance from the future attempts
b. The capital markets are notoriously myopic and their short-term reaction never predicts long-term trends accurately
c. The agency theory shows that the top managers may have incentives (like non-diversifiable employment risk) that are misaligned with those of the shareholders. The managers thus might make diversification decisions in their own self-interest at the expense of the shareholders' interests
d. Both (a) and (c)
