Does managerial risk aversion mitigate or exacerbate fear

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1. Describe the two basic mechanisms whereby unprotected bondholders can be expropriated by shareholders. Can you illustrate your arguments with numerical examples?

2. Does managerial risk aversion mitigate or exacerbate the fear of creditors to be expropriated in favor of shareholders?

3. In a market in which bond covenants are priced at what they are worth, can their presence still increase firm value? When could covenants reduce firm value?

Reference no: EM131241390

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