Following a merger, the change in the risk profile of the merged companies may influence the price earnings ratio just as much as the change in the overall growth rate.

Question

Quizplus · Accepted Answer

The risk profile of a company can have a significant impact on its price earnings ratio, as investors typically demand higher returns to compensate for higher levels of risk. Therefore, if a merger results in a significant change in the risk profile of the merged companies, it is likely to affect the price earnings ratio.

Following a Merger, the Change in the Risk Profile of the Merged