Double Liability at Early American Banks / Howard Bodenhorn.

By:

Bodenhorn, Howard

Contributor(s):

National Bureau of Economic Research

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w21494.Publication details: Cambridge, Mass. National Bureau of Economic Research 2015.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Limited liability is a defining feature of the modern corporation, but it was not always so. By the early 1850s about one-half of all states imposed double liability on bank shareholders. This paper shows that double liability was adopted as deposits increased relative to banknotes and in conjunction with free banking; that double liability was associated with more concentrated bank shareholdings, but had little effect on share liquidity; that it increased the price of bank debt; and, that a regulatory change toward greater shareholder liability increased bank leverage ratios. In forcing bank shareholders to have more "skin in the game," double liability changed bank investor, creditor and managerial behaviors.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w21494 (Browse shelf(Opens below))	Not For Loan

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Previous	nber w21491 The Pricing of Short-Term market Risk: Evidence from Weekly Options /	nber w21492 Fiscal Rules and Discretion in a World Economy /	nber w21493 Equilibrium Price Dispersion Across and Within Stores /	nber w21494 Double Liability at Early American Banks /	nber w21495 Efficiency and Information Transmission in Bilateral Trading /	nber w21496 Peer-to-Peer Markets /	nber w21497 The Effect of Hospital/Physician Integration on Hospital Choice /	Next

August 2015.

Limited liability is a defining feature of the modern corporation, but it was not always so. By the early 1850s about one-half of all states imposed double liability on bank shareholders. This paper shows that double liability was adopted as deposits increased relative to banknotes and in conjunction with free banking; that double liability was associated with more concentrated bank shareholdings, but had little effect on share liquidity; that it increased the price of bank debt; and, that a regulatory change toward greater shareholder liability increased bank leverage ratios. In forcing bank shareholders to have more "skin in the game," double liability changed bank investor, creditor and managerial behaviors.