Event risk covenants and shareholder wealth: Ethical implications of the "poison put" provision in bonds [Book Review]
David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
Learn more about PhilPapers
Journal of Business Ethics 22 (2):119 - 132 (1999)
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||Philosophy Ethics Business Education Economic Growth Management|
|Categories||categorize this paper)|
Setup an account with your affiliations in order to access resources via your University's proxy server
Configure custom proxy (use this if your affiliation does not provide a proxy)
|Through your library|
References found in this work BETA
No references found.
Citations of this work BETA
No citations found.
Similar books and articles
Vincent 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. [REVIEW] Journal of Agricultural and Environmental Ethics 26 (2):333-350.
Klaus-Michael Menz (2010). Corporate Social Responsibility: Is It Rewarded by the Corporate Bond Market? A Critical Note. [REVIEW] Journal of Business Ethics 96 (1):117-134.
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.
Added to index2009-01-28
Total downloads3 ( #324,035 of 1,413,387 )
Recent downloads (6 months)1 ( #154,345 of 1,413,387 )
How can I increase my downloads?