The limited liability of shareholders in a business

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1.According to Gorton; The limited liability of shareholders in a business creates moral hazard because owners can take risks that can benefit them at the potential expense of creditors. true or false ? why ?

2. Banks are subject to runs when the collateral backing their liabilities are subject to market risks and the value of the liabilities reflects these risks. true or false?

3. The bankruptcy of Lehman Brothers "paralyzed the interbank market, where short term borrowing and lending froze". true or false ? why ?

Reference no: EM13909517

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