Strategic judgment proofing:
"A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties -- the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the...
Gespeichert in:
| Hauptverfasser: | , |
|---|---|
| Format: | Buch |
| Sprache: | English |
| Veröffentlicht: |
Cambridge, Mass.
National Bureau of Economic Research
2008
|
| Schriftenreihe: | Working paper series / National Bureau of Economic Research
14183 |
| Online-Zugang: | kostenfrei |
| Zusammenfassung: | "A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties -- the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the tort victims in bankruptcy. Interestingly, senior debt serves the interests of society more broadly: it creates better incentives for the entrepreneur to take precautions than either junior debt or outside equity. Unfortunately, the entrepreneur will raise a socially excessive amount of senior debt. Giving tort victims priority over senior debtholders in bankruptcy prevents over-leveraging but leads to suboptimal incentives. Lender liability exacerbates the incentive problem even further. A Limited Seniority Rule, where the firm may issue senior debt up to an exogenous limit after which any further borrowing is treated as junior to the tort claim, dominates these alternatives. Shareholder liability, mandatory liability insurance and punitive damages are also discussed"--National Bureau of Economic Research web site |
| Beschreibung: | 35, [2] S. graph. Darst. 22 cm |
Internformat
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| 520 | 8 | |a "A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties -- the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the tort victims in bankruptcy. Interestingly, senior debt serves the interests of society more broadly: it creates better incentives for the entrepreneur to take precautions than either junior debt or outside equity. Unfortunately, the entrepreneur will raise a socially excessive amount of senior debt. Giving tort victims priority over senior debtholders in bankruptcy prevents over-leveraging but leads to suboptimal incentives. Lender liability exacerbates the incentive problem even further. A Limited Seniority Rule, where the firm may issue senior debt up to an exogenous limit after which any further borrowing is treated as junior to the tort claim, dominates these alternatives. Shareholder liability, mandatory liability insurance and punitive damages are also discussed"--National Bureau of Economic Research web site | |
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Datensatz im Suchindex
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| id | DE-604.BV023594059 |
| illustrated | Illustrated |
| index_date | 2024-07-02T22:41:33Z |
| indexdate | 2024-07-09T21:25:16Z |
| institution | BVB |
| language | English |
| oai_aleph_id | oai:aleph.bib-bvb.de:BVB01-016909389 |
| oclc_num | 255064750 |
| open_access_boolean | 1 |
| owner | DE-521 |
| owner_facet | DE-521 |
| physical | 35, [2] S. graph. Darst. 22 cm |
| publishDate | 2008 |
| publishDateSearch | 2008 |
| publishDateSort | 2008 |
| publisher | National Bureau of Economic Research |
| record_format | marc |
| series2 | Working paper series / National Bureau of Economic Research |
| spelling | Che, Yeon-Koo Verfasser (DE-588)170952053 aut Strategic judgment proofing Yeon-Koo Che ; Kathryn E. Spier Cambridge, Mass. National Bureau of Economic Research 2008 35, [2] S. graph. Darst. 22 cm txt rdacontent n rdamedia nc rdacarrier Working paper series / National Bureau of Economic Research 14183 "A liquidity-constrained entrepreneur needs to raise capital to finance a business activity that may cause injuries to third parties -- the tort victims. Taking the level of borrowing as fixed, the entrepreneur finances the activity with senior (secured) debt in order to shield assets from the tort victims in bankruptcy. Interestingly, senior debt serves the interests of society more broadly: it creates better incentives for the entrepreneur to take precautions than either junior debt or outside equity. Unfortunately, the entrepreneur will raise a socially excessive amount of senior debt. Giving tort victims priority over senior debtholders in bankruptcy prevents over-leveraging but leads to suboptimal incentives. Lender liability exacerbates the incentive problem even further. A Limited Seniority Rule, where the firm may issue senior debt up to an exogenous limit after which any further borrowing is treated as junior to the tort claim, dominates these alternatives. Shareholder liability, mandatory liability insurance and punitive damages are also discussed"--National Bureau of Economic Research web site Spier, Kathryn E. Verfasser (DE-588)129704946 aut Erscheint auch als Online-Ausgabe National Bureau of Economic Research <Cambridge, Mass.> NBER working paper series 14183 (DE-604)BV002801238 14183 http://papers.nber.org/papers/w14183.pdf kostenfrei Volltext |
| spellingShingle | Che, Yeon-Koo Spier, Kathryn E. Strategic judgment proofing |
| title | Strategic judgment proofing |
| title_auth | Strategic judgment proofing |
| title_exact_search | Strategic judgment proofing |
| title_exact_search_txtP | Strategic judgment proofing |
| title_full | Strategic judgment proofing Yeon-Koo Che ; Kathryn E. Spier |
| title_fullStr | Strategic judgment proofing Yeon-Koo Che ; Kathryn E. Spier |
| title_full_unstemmed | Strategic judgment proofing Yeon-Koo Che ; Kathryn E. Spier |
| title_short | Strategic judgment proofing |
| title_sort | strategic judgment proofing |
| url | http://papers.nber.org/papers/w14183.pdf |
| volume_link | (DE-604)BV002801238 |
| work_keys_str_mv | AT cheyeonkoo strategicjudgmentproofing AT spierkathryne strategicjudgmentproofing |