Which of the following statements is CORRECT?

Question

BlackTom AI · Accepted Answer

First, let's restate the question and options to ensure clarity: Which of the following statements is CORRECT?

Option 1: In general, it is more in bondholders' interests than stockholders' interests for a firm to shift its investment focus away from safe, stable investments and into risky investments, especially those that primarily involve research and development.
Option 2: Hostile takeovers are most likely to occur when a firm's stock is selling below its intrinsic value as a result of poor management.
Option 3: The efficiency of the U.S. economy would probably be increased if hostile takeovers were absolutely forbidden.
Option 4: The managers of established, stable companies sometimes attempt to get their state legislatures to remove rules that make it more difficult for raiders to succeed with hostile takeovers.
Option 5: Stockholders in general would be better off if managers never disclosed favorable events and therefore caused the price of the firm's stock to sell at a price below its intrinsic value.

Option 1 analysis:
This statement asserts bondholders prefer shifting to riskier bets for higher returns. In reality, bondholders typically favor safety and predictable cash flows because they are creditors and rely on the firm’s ability to service debt. Increased risk can jeopardize debt service, so this claim is generally inaccurate and contrary to typical debt-holders’ interests.

Option 2 analysis:
This option claims that hostile takeovers occur when stock trades below intrinsic value due to poor management. The core idea is undervaluation signaling a potential target for raiders who believe they can unlock value through changes in management, capital structure, or strategic direction. This aligns with common corporate finance and takeover theory: undervalued firms are attractive targets for activists and raiders, especially if the market underreacts to the firm’s true potential.

Option 3 analysis:
Arguing that banning hostile takeovers would increase overall economic efficiency is controversial. Critics of takeovers argue that they may improve efficiency by replacing underperforming managers, while supporters claim they can destroy value through unnecessary debt, disruption, or misaligned incentives. Prohibiting takeovers could reduce market discipline and some dynamic efficiency, so the blanket claim of increased efficiency is not generally supported by consensus finance theory.

Option 4 analysis:
This statement notes that managers of established firms sometimes lobby to change rules to hinder raiders. It is plausible and historically observed: managers may seek regulatory protections or anti-takeover provisions to defend against unwanted takeover threats, making this claim reasonable and consistent with governance behavior in real markets.

Option 5 analysis:
The idea that stockholders are better off if managers withhold favorable news so the price stays below intrinsic value is misleading. Disclosure of favorable information generally increases stock prices and improves shareholder welfare by more accurately reflecting value. Deliberate withholding tends to misprice securities and harm investors, so this option is incorrect.

In summary, evaluating the statements against standard corporate finance and governance principles, options that claim bondholders prefer riskier investments (Option 1), or that banning takeovers would raise efficiency (Option 3), or that managers should conceal good news (Option 5) are inconsistent with established theories. The notion that hostile takeovers target undervalued firms (Option 2) is the stance that best matches typical explanations for why takeovers occur. Likewise, the idea that managers sometimes seek legislative protection against raiders (Option 4) reflects a common governance tactic observed in practice.

Which of the following statements is CORRECT?单项选择题

类似问题

In the context of M&A, which of the following statements is correct?

What happens in the takeover market when a company performs poorly?

Which of the following best explains why M&A activity tends to cluster in waves:

Which of the following is true about motivations for takeovers?

A conglomerate merger between two unrelated firms is most likely to create value when:

According to the Australian Financial Review, 2015 was called as _________________ because China Investment Corporation won $2.45 billion investment office portfolio.

Which of the following is an important factor driving the decision on whether the firm uses cash or stocks to acquire another value enhancing firm?

更多留学生实用工具

智能学习助手

风格化写作助手

论文查重助手

文献引用助手

课堂转译助手

课堂笔记助手

Quiz搜索助手

学校历年真题

智能刷题助手

智能匹配练习

希望你的学习变得更简单