Limited liability and sharesâ€™ pricing: sufficient but not necessary
AbstractLimited liability has been seen as crucial for the development of capital markets. In this paper I use the CAPM to analyze how a company is priced differently under different liability regimes. I reach the conclusion that as far as the pricing and liquidity of shares is concerned, the positive features of a limited liability regime are common to â€œpro rataâ€ unlimited liability. The prevalence of the unlimited liability regime over regimes of unlimited liability, prorata (or joint and several) should then be traced in other benefits that limiting liability may bring. Literature and history point to the relationship between bankruptcy procedures and liability regimes as the area where the limited liability regimes may be more cost effective and easier to implement.
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Bibliographic InfoPaper provided by Public policies and local development in its series Openloc Working Papers with number 1115.
Date of creation: 2011
Date of revision:
Corporation and Securities Law;
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- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
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