The Origins of Limited Liability

Guillaume Vuillemey
Additional contact information
Guillaume Vuillemey: HEC Paris - Ecole des Hautes Etudes Commerciales

Working Papers from HAL

Abstract: Limited liability is a key feature of corporate law. Using data on asset prices and capital flows in mid-19th century England, I argue that its liberalization was not decided to relax firms' financing constraints, but to satisfy investors' demand for "safe" stores of value. Limited liability eliminated adverse selection about the quality of other shareholders; stocks could be held to store wealth in diversified portfolios, without extended forms of responsibility. Prices of newly issued stocks are consistent with this hypothesis. Thus, the quest for "safe" stores of value explains not only features of debt markets, but also of equity markets.

Keywords: Limited Liability; Safe Assets; Corporate Responsability; Contracts; Law (search for similar items in EconPapers)
Date: 2023-02-08
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:wpaper:hal-04414083

DOI: 10.2139/ssrn.4351433

Access Statistics for this paper

More papers in Working Papers from HAL
Bibliographic data for series maintained by CCSD ().