There are several judicial cases under the US environmental law, in which a lending bank is liable for cleaning up environmentally hazardous materials generated by its borrowing firm. Such a liability rule, so-called lender liability, is applied to a lending bank which has been actively involved...

Firms will exert too little preventive care if damages are likely to exceed their equity. This is particularly important for environmental and product liability and motivates the current discussion about extending liability to creditors. We propose a model where the firm can be financed by...

Reasons for the joint use of ex ante regulation and ex post liability to cope with environmental accidents have been a longstanding issue in law and economics literature. This article, which includes the first empirical study of the French environmental legal system, analyzes courts’ decisions...

The key question in this paper is to determine whether regulation and regulators information can help solving causal uncertainty problems in liability. A widely held view among Law & Economics scholars is that civil liability alone is not well-suited to cope with environmental accidents,...

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...

Should mortgage brokers face tougher licensing regulations? In light of the mortgage meltdown, many think the answer is an obvious yes, but recent research urges caution.

We reexamine the role of relationships in the loan granting process overall. A practical implication emerging from the classical studies on the role of relationships in credit rationing is that good relationships between a borrower and his lender should, in fact, work to lower the interest rate...