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1. As a company takes on more debt, the chance of bankruptcy increases. This raises costs for creditors and lowers the appeal of taking on additional debt. 2. Debt can motivate managers to work harder for stockholders by increasing risk-taking behaviors that benefit stockholders at the expense of bondholders. 3. Financial distress from high debt burdens can induce stockholders to reject positive net present value projects or cash out existing debt, harming the interests of creditors. Covenants aim to pr

Author

Shirazee

Language

EN