A Type of Agency Problem That Results in Shareholders Gaining

question 109

Multiple Choice

A type of agency problem that results in shareholders gaining from decisions that increase the risk of the firm sufficiently,even if they have negative NPV is:

• A)asset substitution.
• B)debt overhang.
• C)underinvestment.
• D)cashing out.

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Definitions:

Behavior

Refers to the actions or reactions of an object or organism, usually in relation to its environment.

Behaviors

The way an individual acts or responds to external or internal forces.

Consistent

Characterized by staying the same over time, showing reliability or uniformity in actions or outcomes.

Stability

Refers to the condition of being steady, firm, or unchanging over time.