Externalities, Firm-Specific Capital Investments, and the Legal Treatment of Fundamental Corporate Changes

Abstract

Mergers, hostile takeovers, plant closings, and other fundamental corporate changes cause enormous disruption in the lives of everyone connected with firms that experience such events. Workers, managers, customers, suppliers, and their families are all significantly affected. Philanthropists, rival firms, and local governments also suffer significant disruption. The larger a firm is in relation to the size of the community in which it operates, the greater the disruption any such change is likely to have. This Article attempts to develop a framework for thinking about the legal treatment of various groups affected by fundamental corporate changes.