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Lenders and risky activities: strict liability or negligence rule?

Author

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  • Gérard Mondello

    (UniCA - Université Côte d'Azur)

Abstract

The amendments made to CERCLA in 1996 reinforced the exemption of lenders that finance ultra-hazardous activities. Then, they become involved in liability only if they manage or own polluting activities. The paper compares strict liability and negligence rule in an agency model of vicarious liability type, and proposes to restore lenders as principal by applying negligence rules to them while operators would resort to a strict liability rule. This scheme leads the lender to propose to the borrower the most favorable loan level that induces the latter to provide the socially optimal security level.

Suggested Citation

  • Gérard Mondello, 2021. "Lenders and risky activities: strict liability or negligence rule?," Working Papers halshs-03502612, HAL.
    • Handle: RePEc:hal:wpaper:halshs-03502612
    Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-03502612
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    References listed on IDEAS

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    More about this item

    Keywords

    Strict liability; negligence rule; moral hazard; judgment-proof; lenders; risky activities. JEL: K0; K32; Q01; Q58;
    All these keywords.

    JEL classification:

    • K0 - Law and Economics - - General
    • K32 - Law and Economics - - Other Substantive Areas of Law - - - Energy, Environmental, Health, and Safety Law
    • Q01 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Sustainable Development
    • Q58 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environmental Economics: Government Policy

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