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February 6, 2008

Research by Professors Henry Hu and Bernard Black on “Debt Decoupling” featured in Financial Times

A story in a recent issue of Financial Times examines one aspect of some forthcoming research of UT Law professors Henry Hu and Bernard Black. The story focuses on the professors’ analysis of complexities created by credit default swaps and other debt derivatives for individual corporations and for the overall stability of financial markets. Among other things, creditors who hold credit derivatives sometimes might not have incentives to see their debtors succeed. Substantive and disclosure problems can arise, in and out of bankruptcy. The story states that their “findings highlight a crucial problem in corporate restructuring” and notes concerns over the possible impact on systemic financial risk.

Read the Financial Times story

Professors Hu and Black’s research on “debt decoupling” and “equity decoupling” is internationally recognized. The Financial Times has published five stories referring to this research. The lead front-page story of the January 26, 2007 Wall Street Journal was devoted to a new phenomenon now known as “empty voting,” credited them with coining the term, and quoted repeatedly from their first decoupling article. Their term “empty voting,” has come into use worldwide among academics, bankers, corporate executives, hedge funds, institutional investors, judges, lawyers, and regulators.

To read drafts of the forthcoming research:

Henry T. C. Hu and Bernard Black, “Equity and Debt Decoupling and Empty Voting II: Importance and Extensions,” 156 University of Pennsylvania Law Review (forthcoming Jan. 2008) (draft of Jan. 18, 2008), available at

Henry T. C. Hu and Bernard Black, “Debt, Equity, and Hybrid Decoupling: Governance and Systemic Risk Implications,” 14 European Financial Management (forthcoming 2008) (draft of Jan. 2008), available at

About Professors Hu and Black:

Henry T. C. Hu holds the Allan Shivers Chair in the Law of Banking and Finance at The University of Texas School of Law. Hu was chair of the Association of American Law Schools’ Business Associations section in 1996. During 1997–98, he taught at Harvard Law School as the Bruce W. Nichols Visiting Professor. In 2000, he was appointed to the Legal Advisory Board of the National Association of Securities Dealers, in 2001, to NASD Regulation’s e-Brokerage Committee, in 2006, to NASD’s Market Regulation Committee, and in 2007, to NASDAQ’s Market Regulation Committee. In 1996, an exchange-traded index derivative with the ticker symbol “HUI” (in recognition of one of his derivatives articles) was introduced. Today, the HUI is one of the world’s two key gold equity indices.

Bernard S. Black holds the Hayden W. Head Regents Chair for Faculty Excellence at The University of Texas School of Law, is professor of finance at UT’s McCombs School of Business, and managing director of the Legal Scholarship Network. Before coming to Texas, he was professor at Stanford Law School (1998–2004) and Columbia Law School (1988–1998). He has been an advisor on company law, securities law, and corporate governance in Armenia, Brazil, Indonesia, Korea, Mongolia, Russia, Ukraine, and Vietnam.

Related links:

Professor Henry T.C. Hu

Professor Bernard Black

Contact: Kirston Fortune, UT Law Communications, (512) 471-7330,