While Debt Can Reduce Agency Costs Between Shareholders and Management

question 49

Multiple Choice

While debt can reduce agency costs between shareholders and management,

• A)debt can create its own agency costs.
• B)this only happens at extreme levels of debt.
• C)this does not work for firms in mature industries with large cash reserves.
• D)none of the above is true

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Definitions:

Organizational Climate

The overall mood, atmosphere, or environment within an organization, affecting employees' motivation and performance.

Personal Virtue

A trait or quality deemed to be morally good or desirable in a person, such as honesty, integrity, or kindness.

Utilitarian Belief

A principle that actions are right if they are useful or for the benefit of a majority, focusing on the outcomes resulting in the greatest good for the greatest number.

Religious Injunction

A command, directive, or order that is rooted in religious belief or law.