IIMC wrote:
Could not get q13? please explain in detail.
Quote:
Q13:The author of the passage implies that which of the following is a possible partial explanation for acquisition behavior during the 1970’s and 1980’s?
A. Managers wished to imitate other managers primarily because they saw how financially beneficial other firms’ acquisitions were.
B. Managers miscalculated the value of firms that were to be acquired.
C. Lack of consensus within boards of directors resulted in their imposing conflicting goals on managers.
D. Total compensation packages for managers increased during that period.
E. The value of bidding firms’ stock increased significantly when prospective mergers were announced.
The answer lies in the following portion, particularly the part in bold:
Quote:
It seems that factors having little to do with corporate economic interests explain acquisitions. These factors may include the incentive compensation of executives, lack of monitoring by boards of directors, and managerial error in estimating the value of firms targeted for acquisition. Alternatively, the acquisition acts of bidders may derive from modeling: a manager does what other managers do.
Thus, the passage suggests that acquisitions
might be partially explained by "managerial error in estimating the value of firms targeted for acquisition." If that's the case, then we can infer that this reason might also be a "
possible partial explanation for acquisition behavior during the 1970’s and 1980’s" (as stated in question 13).
Choice (B) describes the possible partial explanation suggested by the portion in bold.