Which of the following statements is incorrect?
A) Companies may take advantage of structural changes (e.g., Marriott) to evade the constraints of protective covenants.
B) Bonds with protective covenants sell at a higher price than otherwise equivalent bonds without such protection for their investors.
C) Protective covenants are offered for the benefit of common stockholders.
D) Protective covenants are offered for the benefit of bondholders.

Question

Quizplus · Accepted Answer

Protective covenants are offered for the benefit of bondholders, not common stockholders. They are designed to protect bondholders' interests by limiting the actions a company can take that may negatively affect the value of the bonds.

Which of the Following Statements Is Incorrect