IDEAS home Printed from https://ideas.repec.org/a/bpj/rlecon/v10y2014i1p30n1.html

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

    for a different version of it.

    References listed on IDEAS

    as
    1. Kennan, John & Wilson, Robert, 1993. "Bargaining with Private Information," Journal of Economic Literature, American Economic Association, vol. 31(1), pages 45-104, March.
    2. Avraham, Ronen, 2004. "Modular liability rules," International Review of Law and Economics, Elsevier, vol. 24(3), pages 269-297, September.
    3. 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.
    4. Alon Harel & Keith N. Hylton (ed.), 2012. "Research Handbook on the Economics of Criminal Law," Books, Edward Elgar Publishing, number 13467.
    5. 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.
    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. Maria Fátima Ribeiro Borges & Graça Maria do Carmo Azevedo & Jonas Oliveira, 2025. "Literature review on gender diversity in top management teams of companies and its relationship with firm performance and audit quality," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 22(1), pages 177-201, March.
    3. Penghua Qiao & Anna Fung & Jianchun Miao & Hung†Gay Fung, 2017. "Powerful Chief Executive Officers and Firm Performance: Integrating Agency and Stewardship Theory," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 25(6), pages 100-119, November.
    4. Ulf Richter, 2010. "Liberal Thought in Reasoning on CSR," Journal of Business Ethics, Springer, vol. 97(4), pages 625-649, December.
    5. Chen, Ruiyuan (Ryan) & Liu, Feiyu (Andy) & Zhao, Chen, 2024. "Worldwide board reforms and financial reporting quality," Research in International Business and Finance, Elsevier, vol. 69(C).
    6. Sergi Jimenez-Martin & José M. Labeaga & Mariluz Marco, 1996. "Algunos factores explicativos de la existencia de huelgas durante la negociación colectiva en España," Investigaciones Economicas, Fundación SEPI, vol. 20(2), pages 217-242, May.
    7. Baarda, James R., 2003. "Current Law & Economics Debates: Tools for Assessing Fundamental Cooperative Changes?," 2003 Annual Meeting, October 29 31802, NCERA-194 Research on Cooperatives.
    8. Leslie Rosenthal, 2007. "Economic Efficiency, Nuisance, and Sewage: New Lessons from Attorney-General v. Council of the Borough of Birmingham, 1858–95," The Journal of Legal Studies, University of Chicago Press, vol. 36(1), pages 27-62, January.
    9. Preet Singh & Chitra Singla, 2016. "Executive Stock Options: Will it Work as a Good Governance Mechanism in all Scenarios?," Working Papers id:10985, eSocialSciences.
    10. Bava Fabrizio & Gromis di Trana Melchiorre, 2016. "Disclosure on Related Party Transactions: Evidence from Italian Listed Companies," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 6(2), pages 119-150, July.
    11. Itai Ater & Oren Rigbi, 2015. "Price control and advertising in franchising chains," Strategic Management Journal, Wiley Blackwell, vol. 36(1), pages 148-158, January.
    12. Frankfurter, George M. & Wood, Bob Jr., 2002. "Dividend policy theories and their empirical tests," International Review of Financial Analysis, Elsevier, vol. 11(2), pages 111-138.
    13. 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.
    14. Uwe Jirjahn & Jens Mohrenweiser & Uschi Backes‐Gellner, 2011. "Works Councils and Learning: On the Dynamic Dimension of Codetermination," Kyklos, Wiley Blackwell, vol. 64(3), pages 427-447, August.
    15. Giovanni Cerulli, 2006. "The Redistributive Role of Non-profit Organizations," Documentos de trabajo - Analise Economica 0036, IDEGA - Instituto Universitario de Estudios e Desenvolvemento de Galicia.
    16. 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.
    17. M.J. Keneley, 2014. "The Decision To Demutualize: An Exploration Of The Drivers Of Organizational Change Within The Australian Life Insurance Market," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 85(3), pages 409-425, September.
    18. Saurabh Ambulkar & S. Arunachalam & Raghu Bommaraju & Sridhar Ramaswami, 2023. "Should a firm bring a supplier into the boardroom?," Production and Operations Management, Production and Operations Management Society, vol. 32(1), pages 28-44, January.
    19. Altunbas, Yener & Gambacorta, Leonardo & Reghezza, Alessio & Velliscig, Giulio, 2022. "Does gender diversity in the workplace mitigate climate change?," Journal of Corporate Finance, Elsevier, vol. 77(C).
    20. 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.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    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.degruyterbrill.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.