When Shareholders Pursue Selfish Strategies Such as Taking Large Risks

question 7

Multiple Choice

When shareholders pursue selfish strategies such as taking large risks or paying excessive dividends,these will result in:

• A)undertaking scale enhancing projects.
• B)investments of the same risk class that the firm is in.
• C)positive agency costs, as bondholders impose various restrictions and covenants, which will diminish firm value.
• D)no action by debtholders since these are equity holder concerns.
• E)lower agency costs, as shareholders have more control over the firm's assets.

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