In the event of bankruptcy, who has a better claim for repayment?

In the context of bankruptcy, bondholders have a stronger claim for repayment compared to other parties such as shareholders. This is rooted in the hierarchy of claims established during a bankruptcy process.

When a company undergoes bankruptcy, its liabilities are settled according to a priority order. Secured creditors, which include bondholders, typically have the first claim to any available assets. This means that they are repaid before unsecured creditors and shareholders. Bondholders are effectively lending money to the company in exchange for interest payments and the return of principal at maturity; thus, they are investors who are entitled to repayment under the terms of the bond agreement.

On the other hand, shareholders, being owners of the company, are last in line when it comes to asset distribution during bankruptcy proceedings. Their investments are higher risk since they only receive payment after all other liabilities, including debts owed to bondholders, have been satisfied. Therefore, in a bankruptcy scenario, bondholders are prioritized for repayment due to their creditor status, which substantiates the correctness of this choice.

Government entities often have claims, particularly in regard to taxes, but these claims do not supersede those of secured creditors like bondholders. Corporate executives do not have a financial claim on the company's assets in the context