Liability for Past Environmental Contamination and Privatization
No 2571, CEPR Discussion Papers from C.E.P.R. Discussion Papers
This paper examines the role of liability for past environmental contamination in the privatization processes of Central and Eastern Europe. The theoretical section establishes a link between a risk-averse investorâ€™s amount of information regarding the extent of past environmental contamination (and its cleanup costs) and the investorâ€™s willingness to pay for a particular enterprise, i.e., bid. As the investor obtains a more precise estimate of the uncertain cleanup costs, the investor faces less risk; therefore, the investorâ€™s risk premium falls and the investorâ€™s bid rises. This link generates four hypotheses regarding a privatization agencyâ€™s responses to the investorâ€™s knowledge of cleanup costs. The empirical section of this paper proposes to test these hypotheses with forthcoming analysis using data from the Czech Republic.
Keywords: Liability; Risk; Privatization; environmental contamination (search for similar items in EconPapers)
JEL-codes: D80 K32 (search for similar items in EconPapers)
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Journal Article: Liability for Past Environmental Contamination and Privatization (2004)
Working Paper: Liability for Past Environmental Contamination and Privatization (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:2571
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