Which statement is not true in relation to asset substitution as described in the shareholders-debtholders agency relationship?

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a. Managers have incentives to accept debt finance and invest in higher risk assets to increase the potential returns to shareholders

b. Lenders are generally risk preferers

c. When investments in high-risk assets cause financial distress, shareholders are liable only for the amounts unpaid on their shares

d. Lenders' price debt is based on the expectations that firms will not invest in assets that have higher risk than that which is acceptable to the lenders

Related Book For answer-question

Linear Algebra and Its Applications

ISBN: 978-0321791542

4th edition

Authors: David C. Lay

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Posted Date: Feb 12, 2024 06:21 AM

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Which statement is not true in relation to asset substitution as described in the shareholders-debtholders agency relationship?

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Linear Algebra and Its Applications

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