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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Definitions:

Bargaining Rights

Rights that allow employees and their representatives to negotiate terms and conditions of employment with the employer.

Union Members

Individuals who have officially joined a labor union, enabling them participation in collective bargaining and other union activities.

Outcome Determination

The process of deciding or establishing the result or consequences of an action, often used in the context of dispute resolution or performance evaluation.

Workplace Outcomes

The results or consequences of particular practices and policies implemented in a work environment.