Controlling tunnelling through lending arrangements: the disciplining effect of lending arrangements on value-diversion, its limits and implications

Alperen Afşin Gözlügöl

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: The practices of corporate controllers to divert company value to themselves at the expense of (minority) shareholders and creditors (tunnelling) present a continuing challenge for lawmakers to address. While there is a variety of ways to control selfdealing in public companies, one less studied and appreciated lever against valuediversion is the role of lenders of such companies. This article examines the lending arrangements and common contractual provisions (undertakings, (non-)financial covenants, restrictions), and argues that such arrangements have considerable potential to monitor, deter and restrain value-diversion via self-dealing in the debtor companies. Likely limits to such a potential, and various important factors are also examined. The study concludes with possible implications of such findings.

Keywords: tunnelling; self-dealing; related party transactions; value-diversion; creditor protection; lending arrangements; covenants; debtor companies; lenders; creditor discipline (search for similar items in EconPapers)
JEL-codes: F3 G3 (search for similar items in EconPapers)
Date: 2022-02-01
References: Add references at CitEc
Citations:

Published in European Business Law Review, 1, February, 2022, 33(Issue 1), pp. 125-174. ISSN: 0959-6941

Downloads: (external link)
http://eprints.lse.ac.uk/123517/ Open access version. (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:123517

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().