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What is Stockholders vs. Bondholders Conflicts about?

1. Shareholders favor high-risk projects that offer higher returns, while bondholders prefer lower-risk projects that provide stable returns. This difference in priorities can lead to conflicts between stockholders and bondholders. 2. Corporate actions like spin-offs and high dividend payments can also increase this conflict by transferring wealth from bondholders to stockholders. During spin-offs, bond values typically decline as risk increases. High dividends leave less cash flow for debt repayment. 3

Author

Mujahid Abbas

Language

EN