Which of the following statements is NOT a reason for companies to actively manage risks?
A)Firms generally have lower transactions costs due to a larger volume of hedging activities.
B)Nowadays most investors hold well-diversified portfolios.
C)Managers know more about the firm's risk exposure than outside investors due to asymmetric information.
D)Firms are more likely to have specialized skills and knowledge required for effective risk management.

Question

Quizplus · Accepted Answer

This statement is not a reason for companies to actively manage risks. While it is true that most investors hold well-diversified portfolios, it does not necessarily lessen the importance of risk management for individual companies. The other statements - lower transactions costs, asymmetric information, and specialized skills/knowledge - all provide valid reasons for companies to actively manage their risks.

Which of the Following Statements Is NOT a Reason for Companies