Abstract

In the case of environmental damages that exceed their equity, firms can be induced to exert too low level of care and part of the damages can remain uncovered. These important effects motivate the discussion about lender's liability and financial responsibility as possible solutions. So, first of all, the application of these two solutions in an international context is analyzed. Then, considering an asymmetric information framework, the economic effects that follow the application are pointed out. The lender's liability solution is considered as has been investigated by economic literature. While the advantages of financial responsibility solution in terms of capital structure, decision of investment and level of care are outlined also by the use of an economic model.