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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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