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)both a and b
• D)none of the above

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