Which of the Following Statements Regarding Mergers and Taxes Is

Multiple Choice

Which of the following statements regarding mergers and taxes is FALSE?

A) Because it may be easier to measure performance accurately in a conglomerate,agency costs may be reduced and resources may be more efficiently allocated.
B) Because some employees holding company stock are obligated to hold idiosyncratic risk,they benefit when the firm reduces that risk by conglomerating.
C) Like a large portfolio,large firms bear less idiosyncratic risk,so often mergers are justified on the basis that the combined firm is less risky.
D) Because most stockholders will already be holding a well-diversified portfolio,they get no further benefit from the firm diversifying through acquisition.