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4. Can creditors intervene the borrowing firm’s corporate decisions, such as dividend payout, investment, mergers and...

4. Can creditors intervene the borrowing firm’s corporate decisions, such as dividend payout, investment, mergers and acquisition, etc? Why? (5 points)

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Answer #1

Creditors can't intervene borrowing firm's corporate decisions such as dividend payout, investment , mergers and acquisitions etc. Creditors are not considered as real owners of the company . Share holders are the real owners of the company. It is because share holders are only taking Risk of loss of the company. they will get dividend only when there is profit and after providing all fixed charges. But a company need to provide fixed interest to creditors if there is loss also. So share holders are the real Risk taker and they only have the voting rights in decision making. so the creditors can intervene only the matters related to them.

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