Capital structure theory suggests that companies may put the interests of ________ ahead of the interests of ________.

Question

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Capital structure theory suggests that companies may put the interests of shareholders ahead of the interests of bondholders. This is because shareholders have residual claims on the company's earnings and assets, while bondholders have fixed claims that are typically senior to equity claims. Therefore, companies may prioritize shareholder wealth maximization at the expense of bondholders in certain situations, such as when making dividend or capital investment decisions.

Capital Structure Theory Suggests That Companies May Put the Interests