Standard Life Prize goes to study of conflict between debt and equity holders

Standard Life Investments, the global fund manager, has awarded its prestigious Annual Finance Prize to two professors from Harvard and Stockholm for their investigation into the effect that management fiduciary duties have when there is conflict between equity and debt holders of a company in financial distress.

The award forms part of the European Corporate Governance Institute’s (ECGI) 2013 Working Paper Competition, the results of which were released in Dublin.
The winning paper is ‘Fiduciary duties and equity-debtholder conflicts’ by Dr Bo Becker from Harvard Business School, and professor Per Strömberg from Stockholm School of Economics and the University of Chicago Booth School of Business.

It uses important legal events associated with a Delaware court ruling in the 1991 Credit Lyonnais v Pathe Communications bankruptcy case, to highlight how managerial fiduciary duties are affected by equity-bond holder conflicts in a way that is economically important.

After presenting the Finance Working Paper prize, Guy Jubb, global head of Governance and Stewardship at Standard Life Investments, said the prize-winning paper highlights the dilemma directors face in determining whether their fiduciary responsibilities are to shareholders or creditors at a time when firms are in the ‘zone of insolvency’.

“This is an aspect of public policy that deserves more attention, and the prize-winning paper provides policy-makers with an excellent starting point,” he added.

 

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