Question: It may be difficult to provide incentives for managers to work hard when the firm is not experiencing any financial distress. One solution that capital

It may be difficult to provide incentives for managers to work hard when the firm is not experiencing any financial distress. One solution that theory provides for that problem is to increase the proportion of debt in the of the firm. If a firm is currently financed with 90 percent debt, will additional debt help to further reduce the agency costs between stockholders and managers?

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