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Why did shareholder liability disappear?

Author

Listed:
  • Bogle, David A.
  • Campbell, Gareth
  • Coyle, Christopher
  • Turner, John D.

Abstract

Why did shareholder liability disappear? We address this question by looking at its use by British insurance companies until its complete disappearance. We explore three possible explanations for its demise: (1) regulation and government-provided policyholder protection meant that it was no longer required; (2) it had become de facto limited; and (3) shareholders saw an opportunity to expunge something they disliked when insurance companies grew in size. Using hand-collected archival data, our findings suggest investors attached a risk premium to companies with shareholder liability, and it was phased out as insurance companies expanded, which meant that they were better able to pool risks.

Suggested Citation

  • Bogle, David A. & Campbell, Gareth & Coyle, Christopher & Turner, John D., 2024. "Why did shareholder liability disappear?," Journal of Financial Economics, Elsevier, vol. 152(C).
    • Handle: RePEc:eee:jfinec:v:152:y:2024:i:c:s0304405x23002015
    DOI: 10.1016/j.jfineco.2023.103761
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    Citations

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    Cited by:

    1. Turner, John D., 2024. "Three centuries of corporate governance in the UK," QUCEH Working Paper Series 24-01, Queen's University Belfast, Queen's University Centre for Economic History.
    2. 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.

    More about this item

    Keywords

    Insurance; Regulation; Shareholder liability; United Kingdom;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative
    • N40 - Economic History - - Government, War, Law, International Relations, and Regulation - - - General, International, or Comparative

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