Answer:
They have little to lose if it goes wrong and much to gain if it goes right
Explanation:
shareholders prefer high risk projects when facing a high probability of bankruptcy because the shareholders have little to lose and much to gain if it goes right.
When there is a high probability of bankruptcy shareholders prefer taking a gamble rather than do nothing and have the company shutdown.
Secondly, no matter how much they lose in the high risk high return project, the liability of shareholders are limited to the number of stock they hold.
Thirdly high risk project are high return projects and the high return attached may salvage the company from going bankrupt.
