Q5 Jensen \& Meckling (1976) argue that capital structure has important...
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Finance
Q5
Jensen \& Meckling (1976) argue that capital structure has important implications for conflict between stockholders and bondholders. Which of the following statements correctly describe Jensen \& Mecklings' arguments about these agency issues? (i) More debt in the capital structure makes it more difficult for managers to consume perquisites. (ii) More debt in the capital structure creates incentives for stockholders to invest in riskier projects. (iii) More debt in the capital structure creates increased interest obligations, which make it difficult for managers to retain funds in the firm. All three are true. Only (ii) and (iii) are true. Only (i) and (iii) are true. Only (i) and (ii) are true. None are true
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