Financially Stressed Companies Prone to Favoring Equity Investors over Debtholders
Posted on March 04, 2010 at 12:15 PM EST
Companies in financial distress are prone to take actions that hurt creditors and favor equity investors, a new paper published by Harvard Business School finds. The paper examines the effects of a 1991 Delaware bankruptcy ruling that changed the nature of corporate directors’ fiduciary duties in that state. The change limited incentives to take actions favoring [...]