IDEAS home Printed from https://ideas.repec.org/a/bpj/rlecon/v10y2014i1p30n1.html
   My bibliography  Save this article

Incorporation Rules

Author

Listed:
  • Ayal Adi

    (Faculty of Law, Bar Ilan University, Ramat Gan, Israel)

  • Rotem Yaad

    (College of Law & Business, Ramat Gan, Israel)

Abstract

Following Calabresi and Melamed, legal theory has employed the property rule/liability rule distinction in order to hone our understanding of existing norms, as well as suggest new ones. This paper suggests an addition to the pantheon in the form of a protocol that we call an “Incorporation Rule”. It is a novel mechanism allowing private parties and courts to combine property rule and liability rule protection where both apply to the same entitlement. Incorporation Rules allow for separating the effects of intertwined property and liability rules, focusing on ex-ante voluntary determination of levels of protection usually adjudicated ex-post. Under the protocol, the entitlement is transferred to a special-purpose corporate vehicle, which then issues tailor-made securities to the owner of the entitlement and to the potential buyer or rivalrous user. In this manner, the entitlement is split along the contours of three basic corporate instruments – heterogeneous capital structure, separation of ownership and control, and an independent legal personality. By relying on these known-and-tested corporate mechanisms, risk and transaction costs are minimized, enforcement is improved, and heterogeneous preferences of individuals can be accommodated. The Incorporation Rule protocol thus allows for flexibility in protecting entitlements while facilitating efficient exchange.

Suggested Citation

  • Ayal Adi & Rotem Yaad, 2014. "Incorporation Rules," Review of Law & Economics, De Gruyter, vol. 10(1), pages 1-30, March.
  • Handle: RePEc:bpj:rlecon:v:10:y:2014:i:1:p:30:n:1
    DOI: 10.1515/rle-2012-0017
    as

    Download full text from publisher

    File URL: https://doi.org/10.1515/rle-2012-0017
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    File URL: https://libkey.io/10.1515/rle-2012-0017?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-349, June.
    2. Alon Harel & Keith N. Hylton (ed.), 2012. "Research Handbook on the Economics of Criminal Law," Books, Edward Elgar Publishing, number 13467.
    3. A. Mitchell Polinsky, 1980. "Resolving Nuisance Disputes: The Simple Economics of Injunctive and Damage Remedies," NBER Working Papers 0463, National Bureau of Economic Research, Inc.
    4. Avraham, Ronen, 2004. "Modular liability rules," International Review of Law and Economics, Elsevier, vol. 24(3), pages 269-297, September.
    5. Kennan, John & Wilson, Robert, 1993. "Bargaining with Private Information," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 45-104, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hylton Keith N, 2006. "Property Rules and Liability Rules, Once Again," Review of Law & Economics, De Gruyter, vol. 2(2), pages 137-191, September.
    2. Preet Singh & Chitra Singla, 2016. "Executive Stock Options: Will it Work as a Good Governance Mechanism in all Scenarios?," Working Papers id:10985, eSocialSciences.
    3. Itai Ater & Oren Rigbi, 2015. "Price control and advertising in franchising chains," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 148-158, January.
    4. Tarek Roshdy Gebba & Mohamed Gamal Aboelmaged, 2016. "Corporate Governance of UAE Financial Institutions: A Comparative Study between Conventional and Islamic Banks," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 6(5), pages 1-7.
    5. Giuseppe Dari-Mattiacci & Bruno Deffains, 2007. "Uncertainty of Law and the Legal Process," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 163(4), pages 627-656, December.
    6. Evans, Lewis & Meade, Richard, 2005. "The Role and Significance of Cooperatives in New Zealand Agriculture, A Comparative Institutional Analysis," Working Paper Series 3847, Victoria University of Wellington, The New Zealand Institute for the Study of Competition and Regulation.
    7. Seog S. Hun, 2006. "Limited Competition, Information Asymmetry, and Organizational Forms," Asia-Pacific Journal of Risk and Insurance, De Gruyter, vol. 1(2), pages 1-14, February.
    8. Agnès Labye & Christine Lagoutte & Françoise Renversez, 2002. "Banques mutualistes et systèmes financiers : une analyse comparative Allemagne, Grande-Bretagne, France," Revue d'Économie Financière, Programme National Persée, vol. 67(3), pages 85-109.
    9. Andrés Abeliuk & Gerardo Berbeglia & Pascal Van Hentenryck, 2015. "Bargaining Mechanisms for One-Way Games," Games, MDPI, vol. 6(3), pages 1-21, September.
    10. Mei, Maggie Qiuzhu & Wang, Le & Yan, Jie, 2023. "Maintaining product quality consistency when offshoring to emerging markets: The role of subsidiary control," Journal of International Management, Elsevier, vol. 29(1).
    11. Isabelle Le Breton–Miller & Danny Miller, 2006. "Why Do Some Family Businesses Out–Compete? Governance, Long–Term Orientations, and Sustainable Capability," Entrepreneurship Theory and Practice, , vol. 30(6), pages 731-746, November.
    12. María Victoria Uribe‐Bohorquez & Jennifer Martínez‐Ferrero & Isabel‐María García‐Sánchez, 2019. "Women on boards and efficiency in a business‐orientated environment," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(1), pages 82-96, January.
    13. Mauleon, Ana & Vannetelbosch, Vincent J., 2003. "Market competition and strike activity," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 737-758, May.
    14. Steen Thomsen & Caspar Rose, 2004. "Foundation Ownership and Financial Performance: Do Companies Need Owners?," European Journal of Law and Economics, Springer, vol. 18(3), pages 343-364, December.
    15. van Ours, Jan C., 1999. "The cyclical behavior of holdout durations," Economics Letters, Elsevier, vol. 62(3), pages 365-370, March.
    16. Hwang, Seokyoun & Sarath, Bharat & Han, Seung-youb, 2022. "Auditor independence: The effect of auditors’ quality control efforts and corporate governance," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 47(C).
    17. González-Díaz, Manuel & Montoro-Sánchez, Ángeles, 2011. "Some lessons from incentive theory: Promoting quality in bus transport," Transport Policy, Elsevier, vol. 18(2), pages 299-306, March.
    18. E. Grifell-Tatjé & C. Lovell, 2008. "Productivity at the post: its drivers and its distribution," Journal of Regulatory Economics, Springer, vol. 33(2), pages 133-158, April.
    19. Hubert Tchakoute Tchuigoua, 2011. "Contrat de crédit, décentralisation décisionnelle et performance des institutions de microfinance," Revue Finance Contrôle Stratégie, revues.org, vol. 14(2), pages 143-173, June.
    20. Lei Zhou & Feng Wei & Yu Kong, 2022. "Do Employee Stock Ownership Plans Affect Corporate Social Responsibility? Evidence from China," IJERPH, MDPI, vol. 19(3), pages 1-19, January.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:rlecon:v:10:y:2014:i:1:p:30:n:1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.