Event risk covenants and shareholder wealth: Ethical implications of the "poison put" provision in bonds
Journal of Business Ethics 22 (2):119 - 132 (1999)
| Abstract | This paper examines the ethical implications of "poison put" provisions included in bond offerings. A number of firms are using event-risk protections in bond offerings in an effort to attract investors back into the bond market. One of the most common event-risk protections is a "poison put" provision, which allows the bondholder to "put" the bond back to the firm at par or at a premium under certain specified conditions, such as a takeover effort or a downgrading of the bond by rating agencies. While such a provision is obviously of value to the bondholders, there is a secondary effect that is not as obvious. Using such a provision helps to insure that boards of directors must put the interests of all of the stakeholders ahead of any personal interests of the board members, thus protecting the stakeholders. The use of event-risk protections helps to deter takeovers, induce bidders to negotiate with management in any takeover efforts, and avoid two-tier takeover offers. As a result, the "poison put" provisions have a positive impact on share values while simultaneously protecting the investments of bondholders. Such an impact makes the use of "poison put" provisions in bonds an ethical use of management power. | |||||||||
| Keywords | No keywords specified (fix it) | |||||||||
| Categories | No categories specified (fix it) | |||||||||
| Options |
|
|||||||||
Download options| PhilPapers Archive |
Upload a copy of this paper Check publisher's policy on self-archival Papers currently archived: 5,705 |
| External links |
 |
| Through your library | Configure |
Similar books and articlesVincent Norcia (1988). Mergers, Takeovers, and a Property Ethic. Journal of Business Ethics 7 (1-2):109 - 116.
Ann K. Buchholtz (2001). Trust, Risk, and Shareholder Decision Making. Business Ethics Quarterly 11 (1):177-193.
Insoo Hyun (2000). When Adolescents "Mismanage" Their Chronic Medical Conditions: An Ethical Exploration. Kennedy Institute of Ethics Journal 10 (2):147-163.
Joan Duckenfield (2013). Antibiotic Resistance Due to Modern Agricultural Practices: An Ethical Perspective. Journal of Agricultural and Environmental Ethics 26 (2):333-350.
Klaus-Michael Menz (forthcoming). Corporate Social Responsibility: Is It Rewarded by the Corporate Bond Market? A Critical Note. Journal of Business Ethics.
Richard Hudson (2005). Ethical Investing: Ethical Investors and Managers. Business Ethics Quarterly 15 (4):641-657.
Marguerite Schneider & Alix Valenti (2011). A Property Rights Analysis of Newly Private Firms. Business Ethics Quarterly 21 (3):445-471.
Shawn D. Howton, Shelly W. Howton & Victoria B. McWilliams (2008). The Ethical Implications of Ignoring Shareholder Directives to Remove Antitakeover Provisions. Business Ethics Quarterly 18 (3):321-346.
Victoria B. McWilliams (2008). The Ethical Implications of Ignoring Shareholder Directives to Remove Antitakeover Provisions. Business Ethics Quarterly 18 (3):321-346.
Analytics
Monthly downloads
Sorry, there are not enough data points to plot this chart.
|
Added to index2009-01-28Total downloads1 ( #274,982 of 549,252 )Recent downloads (6 months)0How can I increase my downloads? |
My notes
Discussion
