Should a publicly traded company in a perfect market enact risk management actions to mitigate their company’s unique risks?
- No, shareholders are able mitigate the company's unique risks more efficiently through diversification.
- Yes, as long as r is reduced by enough to raise the company's firm value.
- No, it's more efficient to manage the company's systematic risk in the Firm Value equation.
- It depends on how many market frictions exist.