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Risk shifting implies: When faced with bankruptcy, equityholders tend to invest in highly risky yet negative-NPV projects When faced with bankruptcy, equityholders do not contribute

Risk shifting implies:

When faced with bankruptcy, equityholders tend to invest in highly risky yet negative-NPV projects

When faced with bankruptcy, equityholders do not contribute fresh equity capital even for positive-NPV projects

All of them

When faced with bankruptcy, managers may make accounting changes to conceal the true extent of the problem in order to make the firms business appear to be less risky

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