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

Graeme Acheson

    Research output: Contribution to journalArticlepeer-review

    22 Citations (Scopus)


    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.
    Original languageEnglish
    JournalReview of Law and Economics
    Issue number2
    Publication statusPublished (in print/issue) - 1 Apr 2010

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