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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