Agency Costs Related to Increased Leverage

XYZ Corporation is evaluating the effects of its capital structure on overall firm value and the associated agency costs. The management team is considering an increase in leverage to potentially enhance shareholder returns, but they are aware of the risks involved. They recognize that as debt levels increase, the alignment between shareholder and management interests may diverge due to differing risk preferences.

In this context, the management reflects on the potential agency costs that could arise from their capital structure decisions. Agency costs can manifest in various ways, including the actions of management that may not be aligned with the interests of shareholders and the costs incurred in attempting to monitor and mitigate these issues.

What is the primary agency cost that could arise from the decision to increase leverage at XYZ Corporation?