A New Understanding of the History of Limited Liability: An Invitation for Theoretical Reframing

50 Pages Posted: 23 Aug 2019 Last revised: 13 May 2020

See all articles by Ron Harris

Ron Harris

Tel Aviv University - Buchmann Faculty of Law

Date Written: March 28, 2020

Abstract

I investigate the historical development of limited liability – widely considered a cornerstone of the business corporation – and challenge the commonplace linear narratives about how limited liability evolved. I dismiss the claim that limited liability was invented with the very first joint-stock business corporations around 1600. I also reject the assertion that it became dominant with the limited liability acts of the mid-19th century. My argument is that it was only around 1800 that limited liability became a separate corporate attribute, distinct from legal personality, and that limited liability in the modern sense became a uniform attribute of all corporations only in the 20th century. Since corporations, stock markets and the corporate economy enjoyed a long and prosperous history well before limited liability in its modern sense became established and dominant, the economic theory of limited liability needs to be revisited. The paper opens a new set of conceptual, empirical and theoretical research questions, and points to new possibilities in terms of viable future liability regimes.

Keywords: Corporations, Limited Liability, History, Institutions, Organizations, Stock Markets

JEL Classification: N11, N13, N20, N80, K22, B25, G32

Suggested Citation

Harris, Ron, A New Understanding of the History of Limited Liability: An Invitation for Theoretical Reframing (March 28, 2020). Available at SSRN: https://ssrn.com/abstract=3441083 or http://dx.doi.org/10.2139/ssrn.3441083

Ron Harris (Contact Author)

Tel Aviv University - Buchmann Faculty of Law ( email )

Ramat Aviv
Tel Aviv, 69978
Israel
972 3 6408798 (Phone)
972 3 6407260 (Fax)

HOME PAGE: http://www2.tau.ac.il/Person/law/researcher.asp?id=agihecicf

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