hareholders have legally limited liability with respect to the contracts the company enters into. Explain why such institutional arrangements may lead to an excessive risk appetite of firms depending on the debt ratio

hareholders have legally limited liability with respect to the contracts the company enters into. Explain why such institutional arrangements may lead to an excessive risk appetite of firms depending on the debt ratio

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter1: Introduction And Goals Of The Firm

Section: Chapter Questions

Problem 2E

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Shareholders have legally limited liability with respect to the contracts the company enters into. Explain why such institutional arrangements may lead to an excessive risk appetite of firms depending on the debt ratio.

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