Stockholders These two groups may have interest in the corporation that conflict. Sources of conflict include dividends, dilution, distortion of investment, and underinvestment. Protective covenants work to resolve these conflicts. Stockholders and bondholders have different objective functions, and this can lead to agency problems, where stockholders can expropriate wealth from bondholders. Because the firm is interested in trying to maximize stockholders wealth, there can develop a conflict of interest between stockholders and bondholders. For instance, stockholders have an incentive to take riskier projects than bondholders do and to pay more out in dividends than bondholders would like them to. This conflict can lead to costly decisions by the firm, which lowers the total value of the firm.