Question

Which of the following statements is true?

• A. Takeovers are usually positive NPV projects because they always lead to good synergy.
• B. Political connections are valuable in corrupt countries but not in countries with better institutions, such as the US.
• C. The ownership structure in the US is usually very concentrated.
• D. The pyramidal structure is popular in many countries because the top-tier firms can easily control firms at the bottom with less than 100% ownership.

Answer 1

B is true. Political connections are valuable in corrupt countries where crony capitalism occurs, but not in countries with better institutions, such as the US.

A is false. Takeovers do not always lead to good synergy

C is false. The ownership structure in the US is not usually very concentrated, but distributed.

D is false. The pyramidal structure is popular in many countries because the top-tier firms can easily control firms at the bottom with less than 100% ownership.