1-63 Which of the following refers to the possibility that a firm's owners or managers will take actions contrary to the promises contained in the covenants of the securities the firm issues to raise funds?

Question

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The concept of agency costs refers to the possibility that a firm's managers or owners will take actions contrary to the promises made in the covenants of the securities issued, and this can result in a misalignment of interests between the firm's shareholders and its management, leading to agency costs. Liquidity risk refers to the risk that a firm may not be able to meet its financial obligations; Price risk refers to the risk that the value of a security may decline; Credit risk refers to the risk that a borrower may default on its financial obligations; and Intermediation refers to the process of connecting lenders with borrowers.

1-63 Which of the Following Refers to the Possibility That