Home > Free Essays > Economics > Investment > Company Overdiversification and Its Reasons

Company Overdiversification and Its Reasons Essay

Exclusively available on IvyPanda Available only on IvyPanda
Updated: Apr 24th, 2021

The phenomenon of diversification is not new; in fact, it has been around for a while. Emerging in 1970s, the phenomenon in question was used to denote the situation when a company prefers to hold several stocks, thus, avoiding the possibility of losing its entire financial reserve (Kenny, 2009). True, holding only one stock is extremely risky for an entrepreneurship; however, a range of company leaders, terrified by the perspective of losing their money, disseminate the company’s investments into too many stocks. Therefore, the concern for the company’s financial stability, overrating of the company’s financial assets, and the willingness to seize control over the company, therefore, seemingly contributing to its stability can be viewed as the key reasons for the phenomenon of overdiversification to take place.

As it has been stressed above, most companies resort to overdiversification due to an extreme caution concerning the safety of the company’s financial assets and the unwillingness to choose several investment options, which stems from the lack of trust towards the potential investment options. However, other reasons can be specified, such as industrial policies concerning taxes and antitrust regulations, managers pursuing their interests and the increase in job loss risks. It seems that each of these factors has its effect on a company overdiversification. Still, taxes and antitrust regulations seem to have the greatest effect, since, unlike other factors, they pose a direct threat to the company’s revenues.

Reference List

Kenny, G. (2009). Diversification strategy: How to grow a business by diversifying successfully. Philadelphia, PA: Kogan Page Publishers.

This essay on Company Overdiversification and Its Reasons was written and submitted by your fellow student. You are free to use it for research and reference purposes in order to write your own paper; however, you must cite it accordingly.
Removal Request
If you are the copyright owner of this paper and no longer wish to have your work published on IvyPanda.
Request the removal

Need a custom Essay sample written from scratch by
professional specifically for you?

Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar
Writer online avatar

certified writers online

Cite This paper

Select a referencing style:

Reference

IvyPanda. (2021, April 24). Company Overdiversification and Its Reasons. Retrieved from https://ivypanda.com/essays/company-overdiversification-and-its-reasons/

Work Cited

"Company Overdiversification and Its Reasons." IvyPanda, 24 Apr. 2021, ivypanda.com/essays/company-overdiversification-and-its-reasons/.

1. IvyPanda. "Company Overdiversification and Its Reasons." April 24, 2021. https://ivypanda.com/essays/company-overdiversification-and-its-reasons/.


Bibliography


IvyPanda. "Company Overdiversification and Its Reasons." April 24, 2021. https://ivypanda.com/essays/company-overdiversification-and-its-reasons/.

References

IvyPanda. 2021. "Company Overdiversification and Its Reasons." April 24, 2021. https://ivypanda.com/essays/company-overdiversification-and-its-reasons/.

References

IvyPanda. (2021) 'Company Overdiversification and Its Reasons'. 24 April.

More related papers
Psst... Stuck with your
assignment? 😱
Hellen
Online
Psst... Stuck with your assignment? 😱
Do you need an essay to be done?
What type of assignment 📝 do you need?
How many pages (words) do you need? Let's see if we can help you!