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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), pp. 204-223.

Record type: Article


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


Local EPrints ID: 33438
PURE UUID: 5da9260f-7085-49a1-bd9b-a63514a8e5dd

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Date deposited: 09 Jan 2008
Last modified: 17 Jul 2017 15:52

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Author: R.A. Mason
Author: T.M. Swanson

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