Successor Liability and Asymmetric Information

Posted: 16 Jun 2008

See all articles by Albert H. Choi

Albert H. Choi

University of Michigan Law School; European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: Fall 2007

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.

Keywords: K13, K22, K32

Suggested Citation

Choi, Albert H., Successor Liability and Asymmetric Information (Fall 2007). American Law and Economics Review, Vol. 9, Issue 2, pp. 408-434, 2007, Available at SSRN: https://ssrn.com/abstract=1145995 or http://dx.doi.org/10.1093/aler/ahm013

Albert H. Choi (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States

HOME PAGE: http://www.law.umich.edu/FacultyBio/Pages/FacultyBio.aspx?FacID=alchoi

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/albert-h-choi

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