Long-term liability and the choice of liquidation
Long-term liability and the choice of liquidation
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.
204-223
Mason, R.A.
347f6402-e1aa-43f1-95e0-5a8f7a268f43
Swanson, T.M.
9a266256-9ac8-4d72-a0e5-ba4b95e7aacc
April 1996
Mason, R.A.
347f6402-e1aa-43f1-95e0-5a8f7a268f43
Swanson, T.M.
9a266256-9ac8-4d72-a0e5-ba4b95e7aacc
Mason, R.A. and Swanson, T.M.
(1996)
Long-term liability and the choice of liquidation.
Geneva Papers on Risk and Insurance, 79 (4), .
Abstract
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.
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Published date: April 1996
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Local EPrints ID: 33438
URI: http://eprints.soton.ac.uk/id/eprint/33438
PURE UUID: 5da9260f-7085-49a1-bd9b-a63514a8e5dd
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Date deposited: 09 Jan 2008
Last modified: 11 Dec 2021 15:21
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Author:
R.A. Mason
Author:
T.M. Swanson
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