Disappearing Defendants versus Judgment‐Proof Injurers

Dari‐Mattiacci, Giuseppe; Mangan, Barbara

doi:10.1111/j.1468-0335.2007.00663.x

Cited by 14 publications

(5 citation statements)

References 54 publications

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“…While legal restructures provide some protections to large chains, they are costly and not completely foolproof as a judgment‐proof strategy. An alternative for reducing legal liability in high‐litigation states was simply to sell their assets to smaller chains or independent owners, which, as discussed above, are more likely to be judgment proof against large claims (Cohen ; Dari‐Mattiacci & Mangan ; Gilles ; Ringleb & Wiggins ; Shavell ). There were at least four reasons why a large chain might prefer this option to internal legal restructuring.…”

Section: Industry Background and Hypothesesmentioning

confidence: 99%

Malpractice Laws and Incentives to Shield Assets: Evidence from Nursing Homes

Brickley

Lu²,

Wedig³

2017

J Empirical Legal Studies

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Empirical research on medical malpractice liability has largely ignored incentives to restructure to protect assets. This study provides evidence on asset shielding in the nursing home industry. There was a rapid increase in lawsuits alleging patient neglect or abuse in states with plaintifffriendly tort environments beginning in the second half of the 1990s. We document two apparent asset-shielding trends in these states during the 1998--2004 period: (1) sales of homes by large chains to smaller, more judgment-proof owners; and (2) a reduced propensity to "brand" chainowned units with names that linked them directly to the central corporation or sister units. Twelve states enacted tort reforms during the 2003--2006 period that placed caps on noneconomic damages. Using a difference-in-differences (DD) methodology, we find that the trends in asset-shielding behavior abated or reversed in the states that enacted tort reforms. These findings suggest that tort law affects ownership and other organizational choices in this industry.

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Section: Industry Background and Hypothesesmentioning

confidence: 99%

Malpractice Laws and Incentives to Shield Assets: Evidence from Nursing Homes

Brickley

Lu²,

Wedig³

2017

J Empirical Legal Studies

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“…4 Dari-Mattiacci and De Geest (2005) were the first to differentiate these different accident scenarios, and their results are applied in various contexts; see, for instance, Dari-Mattiacci and De Geest (2006), De Geest and Dari-Mattiacci (2007), Dari-Mattiacci and Mangan (2008), and Dari-Mattiacci and Langlais (2012). noncompliant behavior imposes substantial losses on society, it could be optimal for the regulatory authority to completely ban noncompliant individuals by allowing only wealthy individuals who are willing to abide by the socially optimal behavior.…”

Section: Introductionmentioning

confidence: 99%

Minimum Asset and Liability Insurance Requirements on Judgment-Proof Individuals When Harm Is Endogenous

Kim

Koh

2016

SSRN Journal

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Shavell (2005) studied the optimality of minimum asset requirements within a framework in which individuals can influence the probability of an accident. We reinvestigate Shavellʼs model for the opposite accident scenario, in which individuals can influence the magnitude of harm, and find different policy implications. In particular, we show that it could be optimal to completely ban judgment-proof individuals from participating in a potentially harmful activity. We also examine the effect of liability insurance, and find that regulatory authorities should tighten standards relative to the pure asset requirement and that liability insurance increases social welfare.

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“…For example, Ganuza and Gomez (2008) advocate the use of 'soft' liability standards for insolvent injurers. For the most part, work in this area takes wealth levels as exogenously set (Summers 1983, Dari-Mattiacci and De Geest 2002, Ganuza and Gomez, 2008, Dari-Mattiacci and Mangan 2008, Wickelgren 2011 although some important work considers the possibility that firm capitalization may be the result of strategic behavior (Shavell 2005, Che and Spier 2008, Veld and Hutchinson 2009, Ganuza and Gomez 2011. However, even the latter strain in the literature only studies ex-ante moral hazard.…”

Section: Introductionmentioning

confidence: 99%

Shielding of assets and lending contracts

Arbel

2016

International Review of Law and Economics

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The primary means of enforcement of legal liabilities is through the seizure of debtors' assets. However, debtors can shield their assets in various ways and thereby reduce the power of enforcement. This paper studies the circumstances under which a debtor would choose to shield assets and the value of assets that would be shielded. A key idea is that borrower's wealth mutes shielding incentives. Intuitively, avoiding debts through shielding requires that enough assets will be shielded, for else the debts can be collected from exposed assets. A wealthier debtor would thus need to shield more assets, and at a greater cost, than a debtor with limited wealth. Using this basic understanding, I develop a theory of asset shielding and explore its implications for incomplete lending contracts, explaining the role of equity agreements, equity cushions and collateral, and debt forgiveness, and explore the some of the policy implications.

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Disappearing Defendants versus Judgment‐Proof Injurers

Cited by 14 publications

References 54 publications

Malpractice Laws and Incentives to Shield Assets: Evidence from Nursing Homes

Malpractice Laws and Incentives to Shield Assets: Evidence from Nursing Homes

Minimum Asset and Liability Insurance Requirements on Judgment-Proof Individuals When Harm Is Endogenous

Shielding of assets and lending contracts

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