While Debt Can Reduce Agency Costs Between Shareholders and Management

question 56

Multiple Choice

While debt can reduce agency costs between shareholders and management,

• A)excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects,causing an underinvestment problem.
• B)with debt financing,companies can misuse debt to finance corporate empire building.
• C)excessive debt may also induce the risk-averse managers to forgo profitable but risky investment projects,causing an underinvestment problem.Additionally,with debt financing,companies can misuse debt to finance corporate empire building.
• D)none of the options

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Definitions:

Organizational Goals

The specific objectives that a company or organization aims to achieve, guiding its strategies, operations, and resource allocation.

Job Specification

A detailed description of the role, including the responsibilities, skills and qualifications needed to perform the job effectively.

360-Degree Performance Reviews

A feedback process where an employee is assessed by their supervisor, peers, subordinates, and sometimes clients, providing a comprehensive view of their performance.

Human Resource Managers

Professionals responsible for overseeing the human capital of an organization, including hiring, training, performance evaluation, and ensuring the welfare of employees.