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Does Limited Liability Matter? Evidence from Nineteenth-Century British Banking1

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Acheson, Graeme (2010) Does Limited Liability Matter? Evidence from Nineteenth-Century British Banking1. Review of Law and Economics, 6 (2). [Journal article]

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URL: http://www.qub.ac.uk/schools/QueensUniversityManagementSchool/Research/WorkingPaperSeries/Finance/2009/FileUpload/Filetoupload,150259,en.pdf

DOI: DOI: 10.2202/1555-5879.1444


The superiority of the corporation over other organizational forms is typicallyattributed to the fact that every owner has limited liability. The widely-held, butempirically unsubstantiated, view is that the main advantage of limited liability overextended shareholder liability is that the enforcement costs of the latter generallyimpedes the tradability and liquidity of stock. We use the rich shareholder-liabilityexperience of nineteenth-century British banking to test this standard view. As wellas exploring the means by which unlimited liability was enforced, we examine theimpact of liability regimes on the tradability and liquidity of stock. Our evidencesuggests that liability rules appear to be irrelevant from the perspective of stocktradability and liquidity.

Item Type:Journal article
Faculties and Schools:Ulster Business School
Research Institutes and Groups:Business and Management Research Institute
ID Code:23543
Deposited By:Dr Graeme Acheson
Deposited On:05 Oct 2012 09:43
Last Modified:25 Oct 2012 15:43

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