Conglomerates - an alternative? E-Book

Florian Christ

• Herausgeber: GRIN Verlag
• Sprache: Englisch

Veröffentlichungsjahr: 2004

Beschreibung

Essay from the year 2003 in the subject Business economics - Investment and Finance, grade: 1.3 (A), University of Kassel (Finance;International Management School), course: Investment Finance, language: English, abstract: Many managers believe that the interests of shareholders are best served by industry diversification. Such may be found in the so-called conglomerates (chaebol in South Korea; Keiretzu in Japan). a. Explain why this attitude among managers may exist, and whether there is some rationale behind it, i.e. from the point of view of the managers of these companies. Shareholders interest in buying shares is primarily to earn money. There are two major extremes to invest in shares. The first way is to invest in risky companies with high earnings and the other way is to invest in conservative shares with low earnings. There are a lot of alternatives between these extremes which balance the risk and the earnings. A mix of different shares will be the best solution and balance. The discussion about cooperate diversification starts already in the late 70’s, but until now there are no global accepted ideal results. With current market understanding and knowledge about the influence of trends on individual industries an investment in different industries like conglomerates is rational. Conglomerates with industry diversification can have a balance between risk and earnings with the potential of better results compared to other investments. The diversification of risk in each industry makes a balance between risk and different scenarios possible. Trends in stocks and industries can not be calculated, but a conglomerate can balance this risk trough the different industries. [...]