Opting only in: Contractarians, waiver of liability provisions, and the race to the bottom

This paper will test the core claim of scholars in the nexus of contracts tradition—that private ordering as a process of bargaining creates optimal rules. We do this by analyzing empirical evidence in the context of waiver of liability provisions. These provisions allow companies to eliminate monetary damages for breach of the duty of care through amendments to the articles of incorporation. With all states allowing some form of these provisions, they represent a good laboratory to examine the bargaining process between management and shareholders. The contractarian approach would suggest that shareholders negotiate with management to obtain agreements that are in their best interests. If a process of bargaining is at work as they claim, the opt-in process for waiver of liability provisions ought to generate a variety of approaches. Shareholders wanting a high degree of accountability would presumably not support a waiver of liability. In other instances, shareholders might favor them in order to attract or retain qualified managers. Still others would presumably want a mix, allowing waiver but only in specified circumstances.Our analysis reveals that the diversity predicted by a private ordering model is not borne out by the evidence with waiver of liability provisions for Fortune 100 companies. All states permit such provisions and in the Fortune 100, all but one company has them. Moreover, they are remarkably similar in effect, waiving liability to the fullest extent permitted by law. In other words, one categorical rule was merely replaced by another, dealing a significant blow to the contractarian thesis.

Legal liability, government intervention, and auditor behavior : evidence from structural reform of audit firms in China

This paper investigates how legal liability influences audit quality and audit fees, particularly in the presence of government intervention. Since 2010, all Chinese audit firms were required to transform from a structure of limited liability company (LLC) to limited liability partnership (LLP), which removes the cap on the liability exposure of negligent auditors. By adopting this natural experiment, we document the following findings: first, after audit firms reorganize as LLPs, auditors are more likely to (1) issue modified audit opinions and going-concern opinions, (2) constrain clients’ earnings management, and (3) charge a premium in audit fees, which suggest that exerting unlimited legal liability on negligent auditors improves both audit quality and audit fees. Second, the effect of the LLP adoption is more pronounced when auditors are from local audit firms, and clients are controlled by local governments. Further analyses suggest that the stock prices of clients positively react to the reform event, which indicates that LLP adoption improves the overall value of audits. In summary, our empirical findings are consistent with the argument that legal liability is able to effectively shape auditor behavior in emerging markets where the other institutional mechanisms are relatively weaker and government intervention is heavy.

Lender liability in the Consumer Credit Market

In many countries consumer credit legislation provides for the extension of liability for product failure to the …nancial institution that advances credit to the consumer. In particular, lender liability is imposed on those credit grantors who closely operate with the supplier of the good. This paper provides a rationale for lender-responsibility in the consumer credit market. It shows that, when judicial enforcement is ine¢cient or there is risk of seller liquidation, lender-liability helps to protect consumers who systematically underestimate the probability of product failure and overestimate the extent to which they can obtain compensation.

Limited liability and non-responsiveness in moral hazard and adverse selection problems

This work analyses the optimal menu of contracts offered by a risk neutral principal to a risk averse agent under moral hazard, adverse selection and limited liability. There are two output levels, whose probability of occurrence are given by agent’s private information choice of effort. The agent’s cost of effort is also private information. First, we show that without assumptions on the cost function, it is not possible to guarantee that the optimal contract menu is simple, when the agent is strictly risk averse. Then, we provide sufficient conditions over the cost function under which it is optimal to offer a single contract, independently of agent’s risk aversion. Our full-pooling cases are caused by non-responsiveness, which is induced by the high cost of enforcing higher effort levels. Also, we show that limited liability generates non-responsiveness.

Almost strict total positivity and a class of Hurwitz polynomials

We establish sufficient conditions for a matrix to be almost totally positive, thus extending a result of Craven and Csordas who proved that the corresponding conditions guarantee that a matrix is strictly totally positive. Then we apply our main result in order to obtain a new criteria for a real algebraic polynomial to be a Hurwitz one. The properties of the corresponding extremal Hurwitz polynomials are discussed. (C) 2004 Elsevier B.V. All rights reserved.

Discrete approximations for strict convex continuous time problems and duality

Conselho Nacional de Desenvolvimento Científico e Tecnológico (CNPq)

Susceptibility of strict and facultative anaerobes isolated from endodontic infections to metronidazole and β-lactams

Endodontic infections are mixed aerobic-anaerobic infections and several microbial groups associated to these pathologies are also involved in orofacial infections. The goal of this study was to evaluate the susceptibility of microorganisms isolated from endodontic infections to β-lactams and metronidazole and verify the production of β-lactamases. Clinical specimens were collected from 58 endodontic infections of 52 patients. The microorganisms were isolated in selective and non-selective culture media, under anaerobiosis and aerobiosis, and identified using biochemical methods. In the susceptibility tests, it was used an agar dilution method, and Wilkins-Chalgren agar enriched with blood, hemin and menadione for the anaerobes, while Mueller-Hinton agar was employed for the facultative anaerobes. The production of β-lactamases was evaluated through the biological and chromogenic cephalosporin methods. All tested isolates were sensitive to imipenem and 99.3% to amoxicillin/clavulanate association, while 16.1% showed resistance to amoxicillin and penicillin G, and 4.89% to cefoxitin. Resistance to metronidazole was just found in facultative anaerobes. Production of β-lactamases was detected in 18.2% of the isolates and presented a correlation with resistance to β-lactams.

Response of molars and non-molars to a strict supragingival control in periodontal patients

The posterior position in the arches is one of the factors that underlies the poor prognosis of molar teeth (M). It is speculated that M do not benefit from the oral hygiene routine as well as non-molars (NM) do. This study evaluated the response of M and NM to supragingival control during a 6-month period in 25 smokers (S) and 25 never-smokers (NS) with moderate-to-severe periodontitis. One calibrated examiner assessed visible plaque (VPI) and gingival bleeding (GBI) indexes, periodontal probing depth (PPD), bleeding on probing (BOP), and clinical attachment loss (CAL) at days 0 (baseline), 30 and 180. At baseline, M showed significantly higher mean values of VPI (p = 0.017) and PPD (p < 0.001) compared with NM; CAL was also greater in M (p < 0.001) and was affected by smoking (p = 0.007). The reductions obtained for periodontal indicators at day 180 showed similar responses between M and NM. For CAL, M (NS 0.57 ± 0.50; S 0.67 ± 0.64) and NM (NS 0.38 ± 0.23; S 0.50 ± 0.33) reached an almost significant difference (p = 0.05). Smoking did not influence the response to treatment. Multilevel analysis revealed that, only for PDD reductions, the interaction between sites, teeth and patient was significant (p < 0.001). It was concluded that M benefit from an adequate regimen of supragingival biofilm control; therefore, supragingival condition should be considered in the prognosis of molar teeth.

Límite de la responsabilidad civil del porteador en el transporte terrestre internacional en América Latina: criterios para su fijación = Limit of civil liability of carriers in international land transport in Latin America: criteria for its establishment

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