参考答案：B

解析：

Valuation of distressed companies requires legal, operational and financial due diligence to determine the company’s potential value as well as its liquidation value. The investor needs to understand the different kinds of claims involved in a reorganization or bankruptcy. A thorough analysis of the industry, the firm’s strategies and management is also required. Emotional reactions of selling investors may frequently cause market inefficiencies. The prices of distressed securities fall heavily below its true worth in anticipation of financial distress as the security holders decide to exit the company upon bad news announcements. Investment restrictions of certain institutional investors ( e. g. insurance companies, savings and loans, pension funds, etc. ) may prevent ownership after a company announces financial distress. Many institutional investors are not permitted to hold securities that are below investment grade even if the company is economically viable. Consequently, profitable opportunities may not be arbitraged away-causing mispricing to persist to some extent.