Management may expropriate wealth from bondholders to shareholders through which of the following actions:
A)take on new ventures with much greater risk than was anticipated by creditors.
B)take on more debt to increase the returns to shareholders.
C)issue more stock than was anticipated by creditors.
D)answers a and b are correct.
E)answers b and c are correct.

Question

Quizplus · Accepted Answer

Management can expropriate wealth from bondholders to shareholders by taking on new ventures with much greater risk than was anticipated by creditors. This can lead to higher potential returns for shareholders but also puts the bondholders' investments at risk. Taking on more debt or issuing more stock may also benefit shareholders, but it is not a direct way to expropriate wealth from bondholders.

Management May Expropriate Wealth from Bondholders to Shareholders Through Which