What diversification benefit argument is countered with Lamont's study indicating that oil firm investments in their nonoil subsidiaries fell sharply after oil price drops in the 1980s?
A)Use of internal capital markets
B)Economies of scale and scope
C)Economizing on transaction costs
D)Diversifying shareholder portfolios
E)Identifying undervalued firms

Question

Quizplus · Accepted Answer

Lamont's study suggests that the use of internal capital markets, which is a diversification benefit, was ineffective as oil firms reduced investments in nonoil subsidiaries when oil prices dropped, indicating a lack of efficient capital allocation within diversified firms.

What Diversification Benefit Argument Is Countered with Lamont's Study Indicating