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Underinvestment problem

• The mirror image of the asset substitution problem, wherein stockholders refuse to invest in low-risk assets to avoid shifting wealth from themselves to the debt holders.

 
 

Follow this link for all the terms related to investment.

 
 Embedded terms in definition
 Asset substitution problem
Asset substitution
Assets
Asset
Debt
 
 Related Terms
 Adverse selection problem
Agency problem
Asset substitution problem
Replacement chain problem

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