Bankruptcy and Torts

University of Toronto, Institute of Policy Analysis Working Paper

25 Pages Posted: 24 Jun 1998

See all articles by Moin A. Yahya

Moin A. Yahya

University of Alberta - Faculty of Law

Date Written: May 1998

Abstract

This paper investigates the properties of various legal regimes when there is the opportunity for bankruptcy through debt. The key result is that, for a single tortfeasor, strict liability always yields less than the socially optimal level of care, while negligence will never do any worse than strict liability. When the magnitude of the liability is increased, the firm may increase care and leverage, increase care and decrease leverage, or decrease care and increase leverage. In the case of joint torts, when an increase in liability induces firms to increase their care, a joint and several negligence regime is unambiguously superior. If the converse is true, then joint and several negligence may still dominate, although joint and non-several negligence may be the better regime.

JEL Classification: G33, G32, K13

Suggested Citation

Yahya, Moin A., Bankruptcy and Torts (May 1998). University of Toronto, Institute of Policy Analysis Working Paper, Available at SSRN: https://ssrn.com/abstract=90868 or http://dx.doi.org/10.2139/ssrn.90868

Moin A. Yahya (Contact Author)

University of Alberta - Faculty of Law ( email )

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