What can bondholders do to limit management’s ability to bait and switch?

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What can bondholders do to limit management’s ability to bait and switch?

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What can bondholders do to limit management’s ability to bait and switch?

Explanation & AnswerSolution by a verified expert

Explanation

For limiting management's interest to bait and switch, bondholders can change the existing plan of investing borrowed funds by stating the same in the bond contract.
In the bond contract it should be clearly stated which limits the management's ability to invest in risky projects.

Verified Answer

Bondholders can change existing plans of investing borrowed funds.

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