Partnership fragility and credit costs
Economic teams, including the business partnership, are created to exploit gains from cooperation, but teams also fall prey to shirking and other opportunistic behaviors, which lead to their dissolution. If team production is partly financed with debt, the untimely dissolution of partnerships exposes creditors to default risks that they will price into debt contracts. This paper explores these two features of the nineteenth-century business partnership and finds: (1) partnerships were short-lived teams (two years or less, on average) and larger partnerships were shorter-lived yet; and (2) compared to proprietorship, partnerships paid higher interest rates on short-term debt, after controlling for loan size, maturity, and other observable features. Although there were potential gains from team production, potential opportunism raised the costs of partnerships.
|Date of creation:||Jan 2011|
|Date of revision:|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Howard Bodenhorn, 2002. "Partnership and Hold-Up in Early America," NBER Working Papers 8814, National Bureau of Economic Research, Inc.
- Graeme G. Acheson & John D. Turner, 2006. "The impact of limited liability on ownership and control: Irish banking, 1877-1914 -super-1," Economic History Review, Economic History Society, vol. 59(2), pages 320-346, 05.
- Thorsten Beck & Asli Demirguc-Kunt & Ross Levine, 2002.
"Law and Finance: why Does Legal Origin Matter?,"
NBER Working Papers
9379, National Bureau of Economic Research, Inc.
- Bodenhorn, Howard, 1999. "An Engine of Growth: Real Bills and Schumpeterian Banking in Antebellum New York," Explorations in Economic History, Elsevier, vol. 36(3), pages 278-302, July.
- Wang, Ta-Chen, 2008. "Banks, Credit Markets, and Early American Development: A Case Study of Entry and Competition," The Journal of Economic History, Cambridge University Press, vol. 68(02), pages 438-461, June.
- Bodenhorn, Howard, 2007. "Usury ceilings and bank lending behavior: Evidence from nineteenth century New York," Explorations in Economic History, Elsevier, vol. 44(2), pages 179-202, April.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16689. 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: ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.