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Because they have a "cushion" for their mistakes, would managers of firms that have considerable excess...

Because they have a "cushion" for their mistakes, would managers of firms that have considerable excess funds in cash tend to choose riskier projects?

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Managers have a cushion for their mistakes as they get fixed salary for their services and it is not directly associated with the profit or loss of the company. Although the primary responsibility of managers are taking best care of company’s interest but some time they take advantage of their position and choose riskier projects for firms that have considerable excess funds in cash. If the project will go well, the managers will get credit and if it will fail, the company has to bear the loss so it will harm company’s interest. While the shareholders of the company have direct incentive to work in the best interest of the corporation as the profit maximization of the corporations will increase their wealth.

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