Long-term liability and the choice of liquidation

Mason, R.A. and Swanson, T.M. (1996) Long-term liability and the choice of liquidation. Geneva Papers on Risk and Insurance, 79, (4), 204-223.


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This paper argues that the combination of limited liability, the productive characteristics of many polluting industries, and the long-term nature of certain environmental damages, presents shareholders of limited liability corporations with an incentive to liquidate their firm before large future liabilities are realised. A formal model is developed, and then parameterised, to indicate the types of firms that will engage in this (and other) behaviour; concrete examples of each type are given. The policy implications are explored, concentrating on the need for separate, ex ante regulation to address the distinct problem of strategic liquidation.

Item Type: Article
Related URLs:
Subjects: H Social Sciences > H Social Sciences (General)
Divisions : University Structure - Pre August 2011 > School of Social Sciences > Economics
ePrint ID: 33438
Accepted Date and Publication Date:
April 1996Published
Date Deposited: 09 Jan 2008
Last Modified: 31 Mar 2016 11:59
URI: http://eprints.soton.ac.uk/id/eprint/33438

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