Economic Reasons for the Nonhindrance of Creditors Per Se Rule? A Reply

Abstract

This paper examines a recently proposed per se rule to automatically treat as equity secured loans granted by shareholders to the corporation on the eve of insolvency. It shows that arguments based on the dual quality of the lender-shareholder are insufficient by themselves to propose such a rigid rule, which would curb potentially socially beneficial loans. Further empirical research is needed to shed light on this issue.