Lender liability and large investors

被引:3
作者
Berlin, M [1 ]
Mester, LJ
机构
[1] Fed Reserve Bank Philadelphia, Philadelphia, PA USA
[2] Univ Penn, Wharton Sch, Philadelphia, PA 19104 USA
关键词
controlling investor; lender liability; equitable subordination;
D O I
10.1006/jfin.2001.0312
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
We explore the optimal financial contract for a large investor with potential control over a firm's investment decisions. An optimal menu of claims resembles a U.S. version of lender liability doctrine - quitable subordination. This doctrine permits the court to subordinate a controlling investor`s claim in bankruptcy, but only under well-specified conditions. It allows a firm to strike an efficient balance between: (i) inducing the large investor to monitor, and (ii) limiting the influence costs that arise when claimants can challenge existing contracts. We provide a partial rationale for a financial system in which powerful creditors do not hold blended debt and equity claims. (C) 2001 Academic Press.
引用
收藏
页码:108 / 137
页数:30
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