For Richer, for Poorer: Bankers' Liability and Risk-taking in New England, 1867-1880

Peter Koudijs, Laura Salisbury and Gurpal Sran

No 24998, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study whether banks are riskier if managers have less liability. We focus on New England between 1867 and 1880 and consider the introduction of marital property laws that limited liability for newly wedded bankers. We find that banks with managers who married after a legal change had more leverage, were more likely to "evergreen" loans and violate lending rules, and lost more capital and deposits in the Long Depression of 1873-1878. This effect was most pronounced for bankers with wives from relatively wealthy families. We find no evidence that limiting liability increased firm investment at the county level.

JEL-codes: G01 G21 G28 N21 (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-his
Note: AP CF DAE
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Citations: View citations in EconPapers (4)

Published as PETER KOUDIJS & LAURA SALISBURY & GURPAL SRAN, 2021. "For Richer, for Poorer: Bankers' Liability and Bank Risk in New England, 1867 to 1880," The Journal of Finance, vol 76(3), pages 1541-1599.

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