How liable should a lender be? The case of judgment-proof firms and environmental risk

Article Abstract:

A model of a potentially judgment-proof firm, a lender and a potential victim is presented. In this model, increased lender liability results in a higher accident frequency and lower efficiency. An examination of full, partial and zero lender-liability rules shows that partial lender liability and an equivalent minimum equity requirement generates the highest level of efficiency. However, the former can produce a higher lender contribution to the victim than the latter. In view of these results, the policy under the Comprehensive Environmental Response, Compensation and Liability Act needs re-evaluation.

Models, Liability for environmental damages, Lender liability

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An economic analysis of Australian damage remedies for misleading prospectuses: Trade Practices Act versus Corporations Law

Article Abstract:

The proposal to replace strict liability with due diligence in Australia's prosecution of prospectus cases is problematic. Strict liability under the Trade Practices Act adequately addresses misleading or deceptive behavior by large firms. While due diligence under the Corporations Law may be more effective to address violations by smaller firms, it is likely to increase the cost and complexity of legal proceedings due to a higher demand for accountants and lawyers.

Australia

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An Economic Analysis of Australian Damage Remedies for Misleading Prospectuses: Trade Practices Act versus Corporations Law

Article Abstract:

Australian investments are affected by the accuracy and honesty of prospectuses. Due diligence is an inferior means to protect liability for large firms, but may be the better choice for smaller companies. In general, reliance on due diligence adds complexity and cost to legal action, and will increase business for accountants and lawyers more than improve reporting accuracy.

Interpretation and construction, Ethical aspects, Business ethics, Liability (Law), Legal liability

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