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13 J. Corp. L. 205 (1987-1988)
Bondholders and Stockholders

handle is hein.journals/jcorl13 and id is 215 raw text is: Bondholders and Stockholders Morey W. McDaniel* I. INTRODUCTION ............................................... 206 II. BONDHOLDER LOSSES ......................................... 206 A. From Gems to Junk ..................................... 206 B. How Economists See the Losses .......................... 209 C. Bond Analysts' Response ................................. 212 III. EARLY STATUTORY LIMITS ON CORPORATE DEBT ................. 214 IV. SmnILARITY BETWEEN BONDHOLDERS AND STOCKHOLDERS .......... 218 A. Practical and Functional Similarities ....................... 218 B. The Debt/Equity Distinction .............................. 221 V. BONDHOLDER-STOCKHOLDER CONFLICT .......................... 221 A. Economic Efficiency ..................................... 221 1. Efficiency and the Common Law ..................... 221 2. Unjust Enrichment ................................... 224 B: Financial Theory ........................................ 225 C. Agency Theory .......................................... 230 1. Agency Costs of Equity .............................. 230 2. Agency Costs of Debt ................................ 234 3. Ex Ante Adjustment Process .......................... 238 4. Ex Post Settling Up-The Fiduciary Principle .......... 245 D. Compensating Bondholders for Losses ..................... 251 E. Sharing Gains with Bondholders .......................... 252 F. Views from the Academy ................................. 258 VI. FIDUCIARY DUTIEs TO BONDHOLDERS ........................... 265 A. Four Fiduciary Duties ................................... 265 B. Analogies from Other Fiduciary Relationships .............. 269 C. Duty of Fair Dealing and Duty of Full Disclosure .......... 273 1. Defining the Two Duties ............................. 273 2. Economic Analysis of Cases .......................... 274 3. Summary of Findings ................................ 303 D. Protecting Bondholders in a Takeover ..................... 304 E. A New Fiduciary Duty-Maximize the Value of the Firm ... 307 F. Enforcement of Fiduciary Duties .......................... 309 VII. FARmNss DIsCLOSURE STATEMENT .............................. 312 VIII. CONCLUSION ................................................. 313 * B.A. 1961, Wesleyan University; LL.B. 1964, Stanford Law School; LL.M. 1965, Harvard Law School; Chief Finance Counsel, Union Carbide Corporation, Danbury Cr.

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