Research shows that a key competence of high-performance diversified firms is the ability to
A) hide excess capital.
B) efficiently dispose of excess capital.
C) effectively allocate financial capital.
D) invest internationally.

Question

Quizplus · Accepted Answer

Research suggests that many firms do not adjust their capital allocations in response to changes in the performance of units or the attractiveness of the markets in which units of the corporation compete. Instead, allocations are fairly consistent from year to year. However, firms that assess the attractiveness of markets in which the firm competes and the capabilities of each division and then choose allocations of corporate resources based on these assessments exhibit higher levels of corporate survival, overall corporate performance, stock market performance, and the performance of individual business units within the corporation. These effects have also been shown to be stronger when firms compete in more competitive markets and in times of economic distress. These findings have shown that the ability to effectively allocate financial capital is a key competence of high-performance diversified firms.

Research Shows That a Key Competence of High-Performance Diversified Firms