Title: Debt, Equity and Hybrid Decoupling: Governance and Systemic Risk Implications
Abstract: European Financial ManagementVolume 14, Issue 4 p. 663-709 Debt, Equity and Hybrid Decoupling: Governance and Systemic Risk Implications Henry T. C. Hu, Henry T. C. Hu University of Texas Law School, Texas E-mail: [email protected]Search for more papers by this authorBernard Black, Bernard Black University of Texas, Law School and McCombs School of Business, Texas E-mail: [email protected]Search for more papers by this author Henry T. C. Hu, Henry T. C. Hu University of Texas Law School, Texas E-mail: [email protected]Search for more papers by this authorBernard Black, Bernard Black University of Texas, Law School and McCombs School of Business, Texas E-mail: [email protected]Search for more papers by this author First published: 12 August 2008 https://doi.org/10.1111/j.1468-036X.2008.00450.xCitations: 115 We have benefited from an extraordinary range of workshops and individual comments. Most are listed in Hu and Black (2008). For additional comments and examples, we also want to thank participants in the IMN 14th Annual Securities Lending and Repo Summit (Feb. 2008), ALI-ABA – Corporate Governance: The Changing Environment (Feb. 2008), Conference on Credit Risk Analysis, Mitigation and Transference (Feb. 2008), Baker & Botts – State and Federal Regulation of Hedge Funds (Mar. 2008), ABA – Delaware Law Forum (Mar. 2008), Conference on Shareholder Rights, Shareholder Voting, and Corporate Performance (Mar. 2008), New York University's Pollack Center for Law & Business (Apr. 2008), ISDA 23rd Annual General Meeting (Apr. 2008), World Bank - Conference on Secured Transactions and Insolvency (May 2008), Georgetown Law School - Conference on the History and Future of U.S. and Global Takeover Regulation (May 2008), ABA Section of Business Law and Deutsche Anwaltverein - Global Business Law Conference (May 2008), an anonymous referee, William Allen, Yakov Amihud, John Armour, Gary Bennett, Tom Briggs, Joseph Cialone, Darrell Duffie, Martin Flics, Adam Glass, John Grout, Mark Hynes, Michelle Harner, Kose John, Calvin Johnson, Simon Lorne, David Mengle, Matt Spitzer, and David Yermack. Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Abstract We extend here our prior work, which focused on equity decoupling (Hu and Black, 2006, 2007, 2008), by providing a systematic treatment of debt decoupling and an initial exploration of hybrid decoupling. Equity decoupling involves unbundling of economic, voting, and sometimes other rights customarily associated with shares, often in ways that may permit avoidance of disclosure and other obligations. We discuss a new U.S. court decision which will likely curtail the use of equity decoupling strategies to avoid large shareholder disclosure rules. Debt decoupling involving the unbundling of the economic rights, contractual control rights, and legal and other rights normally associated with debt, through credit derivatives and securitisation. Corporations can have empty and hidden creditors, just as they can have empty and hidden shareholders. ‘Hybrid decoupling’ across standard equity and debt categories is also possible. All forms of decoupling appear to be increasingly common. Debt decoupling can pose risks at the firm level for what can be termed ‘debt governance’− the overall relationship between creditor and debtor, including creditors' exercise of contractual and legal rights with respect to firms and other borrowers. Widespread debt decoupling can also involve externalities and therefore create systemic financial risks; we explore those risks. Citing Literature Volume14, Issue4September 2008Pages 663-709 RelatedInformation
Publication Year: 2008
Publication Date: 2008-07-21
Language: en
Type: article
Indexed In: ['crossref']
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Cited By Count: 160
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