To balance constituent incentives and prevent abuse, the voting rights increase should be calibrated so that contingent capital holders obtain a majority stake only in combination with the largest institutional shareholder.
Source quote, verbatim
To balance the constituents' incentives and avoid abuse,194 the voting rights increase could be calibrated to give CCS holders a majority stake in the company only with, for instance, the largest institutional shareholder.
From
Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011), IV.A. First Trigger: Debt-Equity Conversion, p. 35 https://ssrn.com/abstract=1908473 · source PDF
Cite as
Wulf A. Kaal, Christoph Henkel, Contingent Capital with Sequential Triggers (2011). SSRN: https://ssrn.com/abstract=1908473
Holds when
Change of control limited to the case where the first trigger failed
extended_bykaal:claim:1998455-034 Management incentives for risk control are heightened upon conversion, especially where management knows that ...
extended_bykaal:claim:1998455-033 Because the threat of a change of control leads leaders to take fewer risks in order to avoid triggering conve...
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