Liability for Past Environmental Contamination and Privatization
AbstractThis 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.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2571.
Date of creation: Sep 2000
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Find related papers by JEL classification:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- K32 - Law and Economics - - Other Substantive Areas of Law - - - Environmental, Health, and Safety Law
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