Issuing debt instead of new equity in a closely held firm more likely causes owner-managers to
- accept more unprofitable projects.
- shirk their duties as they have less capital at risk.
- work harder than they would if equity had been issued.
- consume more perquisites because the cost is passed on to the debtholders.
- enjoy more leisure time than they would with an equity issue.
One of the disadvantages of debt capital is that of paying interest and principle on the debt. Unlike... View the full answer