Question: Shareholders prefer high risk projects when facing a high probability of bankruptcy because High risk projects usually bring high rewards. Shareholders have the residual claim

Shareholders prefer high risk projects when facing a high probability of bankruptcy because

High risk projects usually bring high rewards.

Shareholders have the residual claim on a company.

Creditors have the residual claim on a company, and therefore bear the risk.

There is a good chance the government will rescue them in bankruptcy.

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