Does limited liability matter? evidence from nineteenth-century British banking

Graeme Acheson, Charles R Hickson, John D Turner

Research output: Contribution to journalArticlepeer-review

20 Citations (Scopus)

Abstract

The superiority of the corporation over other organizational forms is typically attributed to the fact that every owner has limited liability. The widely-held, but empirically unsubstantiated, view is that the main advantage of limited liability over extended shareholder liability is that the enforcement costs of the latter generally impedes the tradability and liquidity of stock. We use the rich shareholder-liability experience of nineteenth-century British banking to test this standard view. As well as exploring the means by which unlimited liability was enforced, we examine the impact of liability regimes on the tradability and liquidity of stock. Our evidence suggests that liability rules appear to be irrelevant from the perspective of stock tradability and liquidity.
Original languageEnglish
Pages (from-to)247-273
Number of pages17
JournalReview of Law & Economics
Volume6
Issue number2
DOIs
Publication statusPublished - 30 Dec 2010

Keywords

  • limited liability
  • banking
  • shareholder liability

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