When Shareholders Pursue Selfish Strategies Such as Taking Large Risks

Multiple Choice

When shareholders pursue selfish strategies such as taking large risks or paying excessive dividends, these will result in:

A) no action by debtholders since these are equity holder concerns.
B) positive agency costs, as bondholders impose various restrictions and covenants which will
Diminish firm value.
C) investments of the same risk class that the firm is in.
D) undertaking scale enhancing projects.
E) lower agency costs, as shareholders have more control over the firm's assets.