The Use of Accounting Models, Statistical Models, and Securities Marketing Prices to Predict Corporate Failure and the Case for Continuing Fiduciary Obligations to Corporate Creditors

Bond University Law Review, Vol. 3, No. 2, pp. 209-241, 1991

35 Pages Posted: 19 Aug 2009

See all articles by Razeen Sappideen

Razeen Sappideen

Western Sydney University, School of Law

Date Written: August 19, 2009

Abstract

This paper elaborates further why duties to creditors should be of a continuing nature alongside duties owed to shareholders. This viewpoint is advanced for two reasons: (1) Recognition of duties to creditors at the point of insolvency will often be too late as insufficient funds may be available to satisfy claims owed to creditors; and (2) the current state of research does not pinpoint with any degree of confidence an earlier time, prior to insolvency, at which duties to creditors may be said to commence. Such surrogates as have been used to predict the state of a company’s financial health, for example, financial information, statistical prediction techniques, and securities market prices, have proved to be unsatisfactory because of the subjective nature of the evaluation process and the quality of the information on which such evaluation is made.

Keywords: creditor interests, shareholder interests, insolvency, predicting insolvency

Suggested Citation

Sappideen, Razeen, The Use of Accounting Models, Statistical Models, and Securities Marketing Prices to Predict Corporate Failure and the Case for Continuing Fiduciary Obligations to Corporate Creditors (August 19, 2009). Bond University Law Review, Vol. 3, No. 2, pp. 209-241, 1991, Available at SSRN: https://ssrn.com/abstract=1457534

Razeen Sappideen (Contact Author)

Western Sydney University, School of Law ( email )

Locked Bag 1797
Penrith, NSW 2751
Australia

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