 Corporate limited liability and the financial liabilities of firmsJan Toporowski Cambridge Journal of Economics, 2010, vol. 34, issue 5, 885-893 Abstract: This paper examines the recent proposal to eliminate the limited liability of company owners, in the context of the overall composition of the financial liabilities of firms. The traditional neo-classical view of the firm holds that the relative price of different financing only affects the way in which firms finance their activities. However, the paper argues that the behaviour of different firms is affected by the composition of their financial liabilities. The elimination of limited liability for equity will tend to shift the structure of corporate liabilities towards debt instruments, which do have limited liability, or towards regular insurance premiums that would reallocate that liability among firms or shareholders. The paper concludes that this shift in liabilities may stabilise financial markets, and this may eliminate some of the increasing concentration on speculation that is a feature of financial market capitalism. Copyright The Author 2009. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved., Oxford University Press. Date: 2010 Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:oup:cambje:v:34:y:2010:i:5:p:885-893 Ordering information: This journal article can be ordered from Access Statistics for this article Cambridge Journal of Economics is currently edited by Jacqui Lagrue More articles in Cambridge Journal of Economics from Cambridge Political Economy Society Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. |
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