How Liable Should a Lender Be? The Case of Judgment-Proof Firms and Environmental Risk: Reply

A reply to comments on the 1995 paper are presented. Both articles make important contributions to the understanding of creditor liability. Deep pockets are creditor bargaining power serve to mitigate the perverse effect of an increase in lender liability. However, when the firm has access to a rich...

Full description

Saved in:
Bibliographic Details
Published inThe American economic review Vol. 91; no. 3; pp. 739 - 745
Main Author Pitchford, Rohan
Format Journal Article
LanguageEnglish
Published Nashville American Economic Association 01.06.2001
Subjects
Accidents
Bankruptcy
Bargaining
Bargaining power
Creditors
Debt contracts
Economic theory
Environmental impact
Environmental risk
Lender liability
Lenders
Limited liability
Shorter Papers
State of nature
Studies
Subsidies
United States > US
Online AccessGet full text

Cover

More Information
Summary:A reply to comments on the 1995 paper are presented. Both articles make important contributions to the understanding of creditor liability. Deep pockets are creditor bargaining power serve to mitigate the perverse effect of an increase in lender liability. However, when the firm has access to a richer source of actions, the importance of deep pockets may be diminished. Concealed cleanup undermines subsidization. When there are multiple actions, there are examples where the perverse effect of lender liability on care is maintained. It may be that contracts take second place behind other forms of addressing the judgement-proof problem, such as monitoring loan approvals and mergers.
ISSN:0002-8282
1944-7981
DOI:10.1257/aer.91.3.739