Although Restrictive Covenants Can Potentially Reduce Moral Hazard,a Problem with Restrictive

question 44

Multiple Choice

Although restrictive covenants can potentially reduce moral hazard,a problem with restrictive covenants is that

• A)borrowers may find loopholes that make the covenants ineffective.
• B)they are inexpensive to monitor and enforce.
• C)too many resources may be devoted to monitoring and enforcing them,as debtholders duplicate others' monitoring and enforcement efforts.
• D)they reduce the value of the debt contract.

---

Definitions:

Positive Climate

The overall mood or environmental tone within an organization that encourages positivity, cooperation, and employee satisfaction.

Developing Skills

The process of acquiring new abilities or improving existing ones through training or experience, essential for personal and professional growth.

Ethical Communication

The practice of conveying messages in a transparent, honest, and respectful manner, taking into consideration ethical implications and outcomes.

Stakeholder Compassion

The consideration and response to the suffering or needs of stakeholders by businesses in decision-making processes.