Does Limited Liability Matter? Evidence From Nineteenth-Century British Banking
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Graeme G. Acheson
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.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
Articles in the same Issue
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- Surprise! Most Blockbuster Jury Awards Are Ignored By The Stock Market
- Garden Leave vs. Covenants Not to Compete
- On Avoidance Activities After Accidents
- Disregarding the Attorney's Advice: An Agency Perspective
- The Efficiency of Comparative Causation
- Does Limited Liability Matter? Evidence From Nineteenth-Century British Banking
- Conviction, Partial Adverse Selection and Labor Market Discrimination
- Criminal Associations with Bargaining and Build Frictions
Articles in the same Issue
- Article
- Surprise! Most Blockbuster Jury Awards Are Ignored By The Stock Market
- Garden Leave vs. Covenants Not to Compete
- On Avoidance Activities After Accidents
- Disregarding the Attorney's Advice: An Agency Perspective
- The Efficiency of Comparative Causation
- Does Limited Liability Matter? Evidence From Nineteenth-Century British Banking
- Conviction, Partial Adverse Selection and Labor Market Discrimination
- Criminal Associations with Bargaining and Build Frictions
