Debt can reduce agency costs between shareholders and management,but

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Excessive debt can create its own agency conflicts. While some level of debt can align the interests of shareholders and management by imposing discipline on management to avoid default, too much debt can lead to conflicts of interest between debt holders and shareholders. This can cause management to prioritize debt holders over shareholders, which can harm long-term shareholder value. Therefore, excessive debt can create its own agency conflicts.

Debt Can Reduce Agency Costs Between Shareholders and Management,but