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Limited liability and investment: Evidence from changes in marital property laws in the US South, 1840–1850

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  • Koudijs, Peter
  • Salisbury, Laura

Abstract

We study the impact of marital property legislation passed in the US South in the 1840s on households’ investment in risky, entrepreneurial projects. These laws protected the assets of newly married women from creditors in a world of virtually unlimited liability. We compare couples married after the passage of a marital property law with couples from the same state who were married before. Consistent with a simple model of household borrowing that trades off agency costs against risk sharing, the effect on investment was heterogeneous. It increased if most household property came from the husband and decreased if most came from the wife.

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  • Koudijs, Peter & Salisbury, Laura, 2020. "Limited liability and investment: Evidence from changes in marital property laws in the US South, 1840–1850," Journal of Financial Economics, Elsevier, vol. 138(1), pages 1-26.
    • Handle: RePEc:eee:jfinec:v:138:y:2020:i:1:p:1-26
    DOI: 10.1016/j.jfineco.2020.04.003
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    1. Peter Koudijs & Laura Salisbury & Gurpal Sran, 2021. "For Richer, for Poorer: Bankers' Liability and Bank Risk in New England, 1867 to 1880," Journal of Finance, American Finance Association, vol. 76(3), pages 1541-1599, June.
    2. Davis, Lewis S. & Williamson, Claudia R., 2022. "Individualism and women's economic rights," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 579-597.

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    More about this item

    Keywords

    Bankruptcy; Household finance; Economic history;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • N21 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: Pre-1913

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