Does Limited Liability Matter? Evidence From Nineteenth-Century British Banking
Acheson Graeme G.,
Hickson Charles R and
John Turner (j.turner@qub.ac.uk)
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Acheson Graeme G.: Ulster Business School, University of Ulster, N. Ireland
Hickson Charles R: Queen’s University Management School, Queen’s University Belfast, N. Ireland
Review of Law & Economics, 2010, vol. 6, issue 2, 247-273
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.
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:6:y:2010:i:2:n:6
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DOI: 10.2202/1555-5879.1444
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