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Successor Liability and Asymmetric Information

Successor Liability and Asymmetric Information The doctrine of successor liability transfers tort liability arising from the seller's past conduct from the seller to the buyer. If the buyer has as much information about the liability as the seller, all beneficial acquisitions take place and the seller takes the efficient level of precaution. However, if the seller has more information about the liability than the buyer, not all beneficial acquisitions are consummated and the seller takes a suboptimal level of precaution. I argue that, in the presence of information asymmetry, the courts should increase the damages against the (potential) seller to provide better incentives to take precaution while decreasing the damages against the buyer to encourage more beneficial asset sales. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png American Law and Economics Review Oxford University Press

Successor Liability and Asymmetric Information

American Law and Economics Review , Volume 9 (2) – Oct 22, 2007

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Publisher
Oxford University Press
Copyright
Copyright © The Author 2007. Published by Oxford University Press on behalf of the American Law and Economics Association.
Subject
Articles
ISSN
1465-7252
eISSN
1465-7260
DOI
10.1093/aler/ahm013
Publisher site
See Article on Publisher Site

Abstract

The doctrine of successor liability transfers tort liability arising from the seller's past conduct from the seller to the buyer. If the buyer has as much information about the liability as the seller, all beneficial acquisitions take place and the seller takes the efficient level of precaution. However, if the seller has more information about the liability than the buyer, not all beneficial acquisitions are consummated and the seller takes a suboptimal level of precaution. I argue that, in the presence of information asymmetry, the courts should increase the damages against the (potential) seller to provide better incentives to take precaution while decreasing the damages against the buyer to encourage more beneficial asset sales.

Journal

American Law and Economics ReviewOxford University Press

Published: Oct 22, 2007

Keywords: JEL K13 K22 K32

There are no references for this article.