Law Commons^™

Cross-Monitoring And Corporate Governance, Joanna M. Shepherd, Frederick Tung, Albert H. Yoon

Faculty Scholarship

We take the view that corporate governance must involve more than corporate law. Despite corporate scholars' nearly exclusive focus on corporate law mechanisms for controlling managerial agency costs, shareholders are not the only constituency concerned with such costs. Given the thick web of firms' contractual commitments, it should not be a surprise that other financial claimants may also attempt to control agency costs in their contracts with the firm. We hypothesize that this cross-monitoring by other claimants has value for shareholders.

We examine bank loans for empirical evidence of the value of cross-monitoring. Our approach builds on prior empirical work …

Court Of Law And Court Of Public Opinion: Symbiotic Regulation Of The Corporate Management Duty Of Care, Tamar Frankel

Faculty Scholarship

In In re Walt Disney Co. Derivative Litigation the Delaware court exonerated the defendants for their handling of the Ovitz Affair, and yet condemned them. It is a classic example of how a court of law can make law without making law. By an obiter dictum, the Chancellor established the facts of the case and footnoted the sources much like a treatise or a casebook, recounted the general principles of the law, used strong words to describe the defendants' behavior, delved into the moral and business judgment of the defendants, and assisted the market in judging and enforcing its best …

Gap Filling In The Zone Of Insolvency, Frederick Tung

Faculty Scholarship

This paper was prepared for a symposium - Twilight in the Zone of Insolvency: Fiduciary Duty and the Creditors of Troubled Companies - at the University of Maryland School of Law.

Attacks on shareholder primacy have come from numerous quarters, arguing for expansion of the class of beneficiaries of directors' fiduciary duties. Regarding duties to creditors - the focus of this symposium - a long line of cases has recognized that once a firm is insolvent, creditors should be the primary beneficiaries of directors' fiduciary duties. Then in 1991, Chancellor Allen's famous discussion in Credit Lyonnais identified a special vicinity …