If a firm increases its debt to a very high level, then the positive effect of debt

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If a firm increases its debt to a very high level, then the positive effect of debt in aligning the interests of management with those of stockholders tends to become negative. Explain why this occurs.

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Fundamentals of corporate finance

ISBN: 978-0470876442

2nd Edition

Authors: Robert Parrino, David S. Kidwell, Thomas W. Bates

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Question Posted: Jun 12, 2012 01:16 AM

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If a firm increases its debt to a very high level, then the positive effect of debt

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Fundamentals of corporate finance

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