Equity contracts account for a small fraction of external funds raised by American businesses

because

(a)

costly state verification makes the equity contract less desirable than the debt contract.

(b)

there is greater scope for moral hazard problems under equity contracts, as compared to debt

contracts.

(c)

equity contracts do not permit borrowing firms to raise additional funds by issuing debt.

(d)

all of the above.

(e)

both (a) and (b) of the above.