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The trading of unlimited liability bank shares: the Bagehot Hypothesis

Author

Listed:
  • Charles Hickson
  • John Turner

Abstract

From the mid-1820s, banks became the first business sector in Great Britain and Ireland to be granted the right to form freely on an unlimited liability joint stock basis. Walter Bagehot, the renowned contemporary banking expert, warned that shares in such banks would ultimately be owned by widows, orphans and other impecunious individuals. An alternative hypothesis is that the governing bodies of these banks constrained by special legal restrictions on share trading acted effectively to prevent such shares being transferred to the less wealthy members of society. We test both conjectures using the archives of an Irish joint stock bank. The results do not support Bagehot's hypothesis, but instead indicate that shares continued to be owned by wealthy individuals.

Suggested Citation

  • Charles Hickson & John Turner, 2002. "The trading of unlimited liability bank shares: the Bagehot Hypothesis," Working Papers wp241, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp241
    Note: PRO-2
    as

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    File URL: https://www.jbs.cam.ac.uk/cbrwp241/
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    References listed on IDEAS

    as
    1. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
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    Cited by:

    1. Goodhart, C. A. E. & Postel-Vinay, Natacha, 2024. "The City of Glasgow Bank failure and the case for liability reform," Economic History Working Papers 121956, London School of Economics and Political Science, Department of Economic History.

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    More about this item

    Keywords

    unlimited liability; corporate governance; joint stock companies; banking;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • N83 - Economic History - - Micro-Business History - - - Europe: Pre-1913

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