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Conflicts Between Shareholders and Bondholders

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What are some possible conflicts of interest between shareholders and bondholders? How can they be avoided?

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Solution Summary

The solution explains some possible conflicts of interest between shareholders and bondholders?

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Bondholders and Shareholders can have disagreements. These disagreements can be over many things.

The firm's bondholders and stock holders can disagree about the amount of risk the firm has. For example, if we view the equity of a levered firm as equivalent to a call option we can easily see how shareholders have ...

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