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Liability for Past Environmental Contamination and Privatization

Dietrich Earnhart

No 302, William Davidson Institute Working Papers Series from William Davidson Institute at the University of Michigan

Abstract: 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 investor's amount of information regarding the extent of past environmental contamination (and its cleanup costs) and the investor'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 investor's risk premium falls and the investor's bid rises. This link generates four hypotheses regarding a privatization agency's responses to the investor'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; privatization; risk; environmental contamination (search for similar items in EconPapers)
JEL-codes: D80 K32 Q24 Q25 (search for similar items in EconPapers)
Pages: pages
Date: 2000-03-01
New Economics Papers: this item is included in nep-env and nep-law
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Related works:
Journal Article: Liability for Past Environmental Contamination and Privatization (2004) Downloads
Working Paper: Liability for Past Environmental Contamination and Privatization (2000) Downloads
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