The Origins of Limited Liability in Great Britain, the First 'Panic', and Their Implications for Limited Liability and Corporate Governance Today

25 Pages Posted: 15 Jan 2004

Date Written: 31/12/2003

Abstract

Underpinning the Industrial Revolution in Great Britain was the ability by which businesses could raise funds because of the benefits of limited company status. When it became freely available, limited liability gained immensely popular. However, the crash of, and revelations of fraud at, the well-known City of London company, Overend Gurney, changed investor views to distrust and scepticism. It is shown how scepticism was gradually eroded and how limited liability eventually regained popularity. It is also shown how this illustrates the bursting of a speculative bubble and the financial instability hypothesis with similarities to the case of instability at the end of the 20th century in the UK.

Keywords: Fraud, Crash, Limited Liability, Financial Panic

JEL Classification: M40, M41, N83

Suggested Citation

Barnes, Paul A., The Origins of Limited Liability in Great Britain, the First 'Panic', and Their Implications for Limited Liability and Corporate Governance Today (31/12/2003). Available at SSRN: https://ssrn.com/abstract=488703 or http://dx.doi.org/10.2139/ssrn.488703

Paul A. Barnes (Contact Author)

Nottingham Trent University ( email )

Burton Street
Nottingham NG1 4BU, NG1 4LN
United Kingdom

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