IDEAS home Printed from https://ideas.repec.org/a/ucp/jlstud/v32y2003p1-25.html
   My bibliography  Save this article

Share Price Changes and the Arrival of Limited Liability in California

Author

Listed:
  • Mark I. Weinstein

Abstract

What effect does limited liability have on share values? This question is difficult to answer because active stock markets did not develop until the rise of corporate limited liability in the nineteenth century. Previous research has shown that one company with pro rata limited liability, American Express, was actively traded until the 1960s. However, no one has examined the price effect of a change from unlimited to limited liability. The history of corporate law in California provides a natural experiment that can be used to examine the effect of limited liability. Until 1929, all California corporations had pro rata unlimited liability. By a process that lasted until 1931, California adopted limited liability for corporations. In the paper I provide the first empirical examination of the effect that this move had on share prices. I find no evidence of share price changes associated with the change in the liability regime.

Suggested Citation

  • Mark I. Weinstein, 2003. "Share Price Changes and the Arrival of Limited Liability in California," The Journal of Legal Studies, University of Chicago Press, vol. 32(1), pages 1-25, January.
  • Handle: RePEc:ucp:jlstud:v:32:y:2003:p:1-25
    DOI: 10.1086/344559
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/344559
    Download Restriction: Access to the online full text or PDF requires a subscription.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Shaw Livermore, 1935. "Unlimited Liability in Early American Corporations," Journal of Political Economy, University of Chicago Press, vol. 43, pages 674-674.
    2. Grossman, Peter Z, 1995. "The Market for Shares of Companies with Unlimited Liability: The Case of American Express," The Journal of Legal Studies, University of Chicago Press, vol. 24(1), pages 63-85, January.
    3. Forbes, Kevin F, 1986. "Limited Liability and the Development of the Business Corporation," Journal of Law, Economics, and Organization, Oxford University Press, vol. 2(1), pages 163-177, Spring.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ulrike Malmendier, 2009. "Law and Finance "at the Origin"," Journal of Economic Literature, American Economic Association, vol. 47(4), pages 1076-1108, December.
    2. Paolo Maggioni, 2011. "Limited liability and shares’ pricing: sufficient but not necessary," Openloc Working Papers 1115, Public policies and local development.
    3. Paolo Maggioni, 2011. "The introduction of limited liability in nineteenth century England," Openloc Working Papers 1116, Public policies and local development.
    4. Mark I. Weinstein, 2008. "Don't Buy Shares without It: Limited Liability Comes to American Express," The Journal of Legal Studies, University of Chicago Press, vol. 37(1), pages 189-227, January.
    5. Ilgmann, Cordelius, 2011. "The advent of corporate limited liability in Prussia 1843," CAWM Discussion Papers 46, University of Münster, Center of Applied Economic Research Münster (CAWM).
    6. repec:eee:corfin:v:44:y:2017:i:c:p:451-468 is not listed on IDEAS

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:v:32:y:2003:p:1-25. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division). General contact details of provider: http://www.journals.uchicago.edu/JLS/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.